The Hindu Business Line : Soft crude price helps oil marketing cos to make profit

The softening of crude and product prices in the last few weeks has helped public sector oil marketing companies to finally make a profit on auto fuel sales, especially diesel.

According to sources, the marketing companies have started registering a positive margin of close to 75 paise per litre on diesel and Rs 1.50 per litre on petrol beginning end December.

However, since they revise their accounts on a fortnightly basis (using the average prices of the last fortnight as the benchmark for the current one) the positive margins may start reflecting on the books of accounts beginning second half of January.

The calculations may go wrong only in case of any sudden volatility on crude as well as product price front during the remaining days of the current fortnight.

Sources in the companies are expecting the international diesel prices to stabilise at the current level of around $64 a barrel throughout this month.

"Diesel prices which had shot up to historic high in 2006 have finally broken the $70 support level and are not showing any sign of firming up for almost a month now. In fact, they have come down by almost $1 during the first nine days of this month," said one company official.

Though the winter demand for gas oil casts a shadow of uncertainty over the future movement of petrol prices, prices hovered between $66-68 a barrel during the last two fortnights.

Despite some late movement crude oil is also range bound.

When contacted, Mr S.V. Narasimhan, Director-Finance of IOC, however, stressed that OMCs were still losing money on both petrol and diesel and may generate some positive margin from next fortnight, if prices continue at this level.

LPG under-recoveries

Meanwhile, international prices of LPG prices are firming up and currently ruling at $520 per tonne, up by $70 per tonne.

If the price trend continues, under-recoveries in LPG which had come down from Rs 180 to Rs 130 per cylinder in October will once again shoot to approximately Rs 170 per cylinder beginning February.

Oil companies follow a monthly pricing cycle in the case of LPG and the last month's average is used as benchmark of the current month.