Margins reduced after record fall in diesel globally, refiners will lose profits

Russia's invasion of Ukraine in February last year brought a record drop in diesel and petrol prices in the following quarter. This has resulted in unprecedented profits for oil refiners globally, but this year will see just the opposite. Experts say that the profits of refiners are going to be affected. An analysis of data and industry experts said a fall in global cracks in April-June this year would dent refiners' profits compared to the outlier period last year.
As oil market disruption caused by rising demand, low inventories, and Russia's invasion of Ukraine caused rifts, the gap between a barrel of crude oil (crude) and refined petroleum products from it – has moved upwards since March last year. Diesel price crossed US$ 30 per barrel and petrol price neared US$ 20 and continued the upward trend in the April-June quarter.
In June last year, the price of diesel shot up to USD 74.95 per barrel, while the price of petrol reached close to USD 42. The price of jet fuel reached up to US$62. An analysis of data for the past five years showed that petrol prices rarely touch double digits, while diesel prices have never exceeded US$20.
That hike, experts say, resulted in bumper profits for refiners, but now that margins have stabilized near normal levels, earnings will come down. In June this year, diesel prices ranged from US$16 to US$19, while petrol prices ranged from US$10 to US$14. He said that as a result of this unusual situation, refiners would report lower earnings in the April-June quarter.
Reliance Industries Ltd, the operator of the world's largest single-location refining complex, is scheduled to announce its first-quarter earnings on Friday. The country's largest oil company Indian Oil Corporation (IOC) will announce its first-quarter results on July 28 and Bharat Petroleum Corporation Limited (BPCL) will do so on July 26.
Petrol prices declined globally in June, which has affected the profitability of refiners. This has led to a build-up of inventory in major trading centers around the world. Data showed margins on petrol in Asia fell more than 102 percent in July and Brent crude was discounted to 14 cents a barrel, its lowest for this time of year at least since 2000.