Oil firms lose up to Rs 18 per litre as high crude squeezes margins: ICRA

Oil marketing companies are selling petrol and diesel at a loss of Rs 14 per litre and Rs 18 per litre respectively as elevated crude prices outpace capped retail fuel rates squeezing marketing marginsBesides losses on petrol and diesel the elevated energy prices post West Asia crisis are likely to leave companies with an under recovery of Rs 80000 crore on cooking gas LPG in the current fiscal while fertiliser subsidy is projected to rise to Rs 205 to 225 lakh croreRating agency Icra said supply disruptions in the Strait of Hormuz handling around 20 per cent of global oil and LNG trade have tightened availability of fuels fertilisers and chemicals pushing up prices and increasing cost pressures across downstream industriesCrude prices before the West Asia crisis broke out two months back were around USD 7072 a barrel The stable pump prices for auto fuels amid elevated crude oil prices are impacting the profitability of the oil marketing companies OMCs said Prashant Vasisht Senior Vice President and CoGroup Head IcraAt crude prices of USD 120125 per barrel marketing margins on petrol and diesel are estimated to be negative Rs 14 a litre and Rs 18 per litre respectively Icra estimates LPG underrecoveries could reach Rs 80000 crore in FY2027 if current trends persist while the fertiliser subsidy burden is projected to rise to Rs 205225 lakh crore above the budgeted Rs 171 lakh croreElevated raw material and energy costs are expected to weigh on profitability across oil marketing fertilisers chemicals and city gas distribution sectors with limited ability to fully pass on higher costs to end consumers Overall Icras outlook on the crude oil refining segment remains stablewhile the outlook on the fuel retailing fertiliser basic chemicals and petrochemical sectors remains negative Vasisht addedIcra expects the pressure on margins and credit profiles to persist in the near term with any relief contingent on easing geopolitical tensions and normalisation of global supply chains The fertiliser sector is also facing sharp cost escalation driven by higher sulphur and ammonia prices and elevated natural gas costs Urea pool prices have risen to about USD 19 per million British thermal unit in April 2026 from USD 13 before the crisisSignificant raw material price inflation coupled with inadequate subsidy revision is set to moderate the profitability of the PampK fertiliser players Vasisht said adding that weather risks could further limit farmers ability to absorb price hikesChemical and polymer prices have surged amid disrupted trade flows and higher fuel costs prompting stockpiling by manufacturers and consumers However Icra expects demand to normalise once inventory buildup subsides particularly in segments exposed to global oversupplyCity gas distributors face margin pressure from rising gas prices and currency depreciation While profitability in piped natural gas PNG for households remains relatively stable due to priority gas allocation compressed natural gas CNG margins are expected to weaken as cost increases are only partially passed onIcra said elevated energy and input costs will likely compress margins across multiple sectors leading to weaker credit profiles in some casesThis story has been sourced from a third party syndicated feed agencies Midday accepts no responsibility or liability for its dependability trustworthiness reliability and data of the text Midday managementmiddaycom reserves the sole right to alter delete or remove without notice the content in its absolute discretion for any reason whatsoever