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petrol and diesel cheaper Big news has come. In fact, in view of the elections to be held in some states in November-December, Oil Marketing Companies (OMCs) may cut the prices of petrol and diesel by Rs 4-5 per liter from August. JM Financial Institutional Securities said in a research that in view of the elections in major states in November-December, government oil companies may be asked to cut the price of petrol / diesel by Rs 4-5 per liter from August. Maybe, because the balance sheet of the oil companies has been fixed to a great extent. Due to this, it is likely to register strong profits in FY24. The report, however, did not mention the timeline and quantum of possible cuts. It will depend on what is the price of crude oil at that time and what is the position of the rupee against the dollar.
A lot will depend on the price of crude oil
Oil companies appear to be well valued, but significant uncertainty remains over earnings in the fuel marketing business, reports JM Financial Institutional. The strong pricing power of OPEC plus may propel the crude oil price during the next 9-12 months. Oil companies expect crude prices to remain below $80/barrel, though this will depend on the government fully offsetting the FY23 under-recovery.
Danger on the rise in the price of crude oil
The report said the valuations of OMCs are sound, but a sharp jump in crude oil prices during elections could threaten earnings. If Brent crude price crosses $85 and there is any cut in fuel price, the earnings of oil companies could be at risk, as the chances of fuel price cut during elections are very less. The report said that there is a risk of increase in the price of crude oil. OPEC Plus, given its strong pricing power, will continue to support Brent crude price at US$75-80 per barrel, which is the fiscal break-even crude price for Saudi Arabia.
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