Sentiment positive for OMCs amid lower oil prices, marketing margins

The volatile geo-political situation should lead to some caution for investors. But given the weakness in global and China demand, these trends could persist

Geopolitics is impacting the energy sector with crude oil prices falling below $70/barrel (bbl) last month for the first time since December 2021. And, gross refining margins (GRMs) have collapsed to $2/bbl, due to weak demand from China.

While weak GRMs will hurt oil marketing companies (OMCs), high retail and marketing margins will offset that impact.

Going forward, if these trends persist, OMCs could see strong profits. One potential issue may be government intervention to reduce retail prices ahead of the Maharashtra state election.

While this would restrict profits if crude prices stay down, it would lead