Moody’s Investors Service has forecasted a recovery in marketing margins and lower oil prices to restore profitability for oil marketing companies (OMCs) in the fiscal year 2024 (FY24). However, the overall earnings for fiscal 2023 ending on March 31, 2023, will be weak because of marketing losses in the first half of the fiscal year due to a mismatch between net realised prices and international prices caused by fuel price caps.
Here are a few things to remember:
Moody’s Prediction: Moody’s Investors Service has forecasted a recovery in marketing margins and lower oil prices to restore profitability for OMCs in FY24. The company expects that the weak earnings in fiscal 2023 will be offset by the recovery in marketing margins and lower oil prices in FY24.
Weak Earnings in Fiscal 2023: Despite the positive outlook for FY24, Moody’s has warned that the overall earnings for fiscal 2023 will be weak because of marketing losses in the first half of the fiscal year. The mismatch between net realised prices and international prices caused by fuel price caps is the main reason for the weak earnings.
Fuel Price Caps: The Indian government has imposed fuel price caps to control inflation and maintain affordability for consumers. However, this has resulted in a mismatch between net realised prices and international prices, leading to marketing losses for OMCs.
Recovery in Marketing Margins: The recovery in marketing margins and lower oil prices in FY24 will help restore profitability for OMCs. This will also benefit the overall Indian economy, as lower oil prices can help control inflation and boost consumer spending.
In conclusion, Moody’s has forecasted a recovery in marketing margins and lower oil prices to restore profitability for OMCs in FY24. However, the overall earnings for fiscal 2023 will be weak due to marketing losses in the first half of the fiscal year caused by fuel price caps. The positive outlook for FY24 is a welcome development, and the markets will be closely watching the performance of OMCs in the coming months.