Domestic refiners buck global uptrend - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Domestic refiners buck global uptrend

Jul 17, 2000

The high petro-product prices might be disrupting the calculations of many central bankers. However, the one person smiling all the way to the bank is the refining company. Global refining companies are having their best quarter in a decade. The refining companies have reason to smile, as the last two years have been tough on them. In '98 the petroleum prices touched their ten-year lows. To counter the depressed prices the oil producing countries cut production resulting in the upward journey of crude oil prices.

However, the rise in crude prices was not followed by a corresponding rise in petro-product prices and this squeezed refining margins even further. Beginning of Year 2000 has seen their fortunes improve as petro-product prices have firmed up. The rise in prices was primarily lead by the U.S, where petrol prices shot through the roof at more than $2 / gallon. In fact the rally in prices had to be cut short by Government intervention.

Refining margins zoom...
$/barrel FY99 FY00
Europe 1.8 4.6
U.S 3.0 6.7

One would assume that with global refining margins bouncing back the fortunes of the Indian refining companies would also swell. Especially, since this sector has been deregulated and prices are linked to international rates.

Sadly this is not be, as although the sector has been deregulated the refining companies are not receiving their dues on time. The Oil Co-ordination Committee (OCC) has not revised the final consumer prices following the rise in international petro-product prices. This has resulted in a deficit in the oil pool account and subsequently the inability of the Petroleum ministry to pay the agreed prices for products purchased. With delay in payments the cash flows of the refining companies have been adversely hit and they will have to resort to costly short-term borrowings. This will also throw their working capital management plans out of sync.

Although the energy sector is positioned for strong growth with the economy on the upswing there are non-market forces affecting the balance sheets of these companies. Thus one can expect these companies to track global trends only with the break down of the administered pricing mechanism.

Equitymaster requests your view! Post a comment on "Domestic refiners buck global uptrend ". Click here!

  

More Views on News

GAIL Misses Earnings Estimates. Company Ditches Plan to Split (Views On News)

Jun 10, 2021

GAIL's earnings and proposal to monetise pipelines through InvIT route, puts stock in focus.

ONGC Hits 52-Week High: Key Triggers that Drove the Stock This Week (Views On News)

Jun 5, 2021

ONGC stock at 52-week highs amid the recent rally in crude oil prices.

Adani Enterprises Hits New Record High. Marketcap Surpasses Rs 1.5 tn (Views On News)

Jun 2, 2021

Adani Enterprises share price is up 925.7% in one year. Can it go higher?

Here's Why Tide Water Oil Shares Are Rallying (Views On News)

Jun 2, 2021

The three reasons why Tide Water Oil shares have zoomed 1.5 times in less than a month.

What's Driving the Rally in Reliance Shares? (Views On News)

Jun 1, 2021

The recent run up in Reliance Industries shares helps Nifty post new record highs.

More Views on News

Most Popular

Hotel Stocks Will Reward Investors (Fast Profits Daily)

Jun 8, 2021

This is why I'm bullish on the hotel and hospitality sector.

My 'Unlock' Investments (Fast Profits Daily)

Jun 11, 2021

The best unlock investments you can make in the market.

How I Discovered a 400-Year-Old Open Secret to Extreme Wealth (Profit Hunter)

Jun 11, 2021

Charlie Munger's open secret about investing success.

The Most Visible Sign of India's Revival is on Two Wheels (Profit Hunter)

Jun 9, 2021

Investing in the best stocks could result in wealth compounding on a massive scale.

More

India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE OIL & GAS


Jun 18, 2021 (Close)

S&P BSE OIL & GAS 5-YR ANALYSIS

COMPARE COMPANY

MARKET STATS