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The brokerage firm also added that demand for Indian oil products fell 4.9 percent year-on-year (YoY) in February 2021.
Brokerage firm CLSA has given a ‘buy’ rating for Hindustan Petroleum Corporation Limited, while maintaining ‘outperform’ for Oil India, Indian Oil Corporation Limited (IOCL), and Bharat Petroleum Corporation Limited (BPCL).
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The CLSA note stated: “Compliance by the Organization of the Petroleum Exporting Countries (OPEC) was strong, and the decision to roll over output cuts into April was a positive surprise. This has driven up Brent to $69 per barrel of oil, but futures remain in backwardation.”
The brokerage firm also added that demand for Indian oil products fell 4.9 percent year-on-year (YoY) in February 2021. “Asian gross margins were largely flat month-on-month at $2 per barrel of oil in March 2021TD, even as gasoline spreads saw a notable spike. Our marker suggests a quarter-on-quarter rise of $0.2-1.1 per barrel of oil in gross margins for Reliance Industries Limited, Indian Oil Corporation, Bharat Petroleum Corporation Limited, and Hindustan Petroleum Corporation Limited,” stated the CLSA note.
The report further added that a pause in price hikes has pulled down marketing margin on diesel and petrol, but spot margins are above long-term averages.
India’s fuel consumption plummeted for the second consecutive month in February with record-high prices obstructing a demand recovery. Consumption of petroleum products fell 4.9 percent to 17.21 million tonnes year-on-year in February, according to data from the Petroleum Planning and Analysis Cell (PPAC) of the Ministry of Petroleum and Natural Gas.
Prices of petrol and diesel had risen to their highest levels last month before state-owned fuel retailers decided to hold off on further hikes lest it affects the chances of the ruling party in the forthcoming assembly polls in states such as West Bengal.
Indian demand has contracted but refining and marketing margins have remained steady. Diesel, the most widely used fuel in the country, saw a year-on-year drop of 8.5 percent to 6.55 million tonnes whereas petrol consumption fell 6.5 percent to 2.4 million tonnes. The sale of cooking gas LPG rose 7.6 percent.
The monthly report of OPEC has predicted a 13.6 percent rise in India’s oil demand this year to 4.99 million barrels a day. According to a Reuters report, OPEC and other oil producers (jointly known as OPEC+) are mulling rolling over output cuts from March into April.