OMCs may see rerating as crude stays soft, GRMs strong and LPG losses ease

The next few quarters could favour downstream refiners and marketers over upstream, with Brent expected to stay in a $60-65 range or drift lower, while GRMs remain strong and LPG under-recoveries ease

The global oil & gas scenario suggests that the next few quarters could see downstream refiners and marketers (oil marketing companies, or OMCs) outperform upstream. Crude oil is expected to remain flat or trend downwards from the current range of Brent $60-65/barrel (bbl). Meanwhile, gross refining margins (GRMs) remain strong and OMCs have healthy marketing margins, and may enjoy sharp decline in LPG (liquefied petroleum gas) under-recoveries.

 

Managements across OMCs seem positive on volume growth, GRM outlook, and capex executions. Hence, BPCL, HPCL, and IOC could all see upgrades unless some geopolitical factor leads to a sharp upswing in crude