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Our Bureau

New Delhi, Oct. 24 The movement in global crude prices and the OPEC meeting has never drawn so much attention. While the drop in crude prices raises hope of a possible cut in domestic retail selling prices of auto and cooking fuels, the public sector oil marketing companies (OMCs) are looking for stability to sustain their profitability.

The crude oil prices on New York Mercantile Exchange slipped below $64 a barrel during Friday intraday trading. The India crude basket is expected to be in the range of $58-60 a barrel for Friday. The Indian crude oil basket, which comprises Oman-Dubai sour grade crude and Brent date sweet crude, declined to $61.28 a barrel on Thursday.

However, according to industry sources, for any price cut to happen, international oil prices have to sustain a level for some time, as the OMCs continue to take a hit on their profitability due to rupee depreciation and inventory losses.

Though the revenue loss on sale of petroleum products below the cost prices is narrowing, industry sources say gains of crude price reduction is being negated by rupee depreciation. The rupee has depreciated by almost 20 per cent.

“The sharp drop in crude prices is hitting the OMCs profitability as they suffer inventory losses. The crude being processed now is from the purchases of August-September, which was at a higher price,” industry sources told Business Line. “We are always carrying high inventory costs. For us to benefit from the crude prices decline, the prices must remain stable for six months,” an OMC official said.

The under-recoveries on marketing of petroleum products is estimated at Rs 1,47,000 crore based on the prices of the second fortnight of October. The three OMCs – IOC, BPCL, and HPCL – were expected to break even on sale of petrol, diesel, kerosene and LPG at $67 a barrel crude when a dollar was equivalent to Rs 41.

However, now with rupee depreciating close to 50 versus dollar, the breakeven point was below $60. For depreciation of every rupee against dollar the gross revenue loss incurred by OMCs rises by Rs 8,500 crore.

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