The global oil markets encountered significant disruptions in 2023, marked by geopolitical tensions, sluggish demand from major consumers, and a constricted global supply. This tumultuous environment led to pronounced price volatility throughout the year.
As efforts are made to stabilize the current turbulence, experts anticipate the oil market to grapple with the delicate balance of global demand and supply in 2024. The accelerated growth of production in the United States adds complexity, creating uncertainty around potential supply cuts within the Organization of the Petroleum Exporting Countries (OPEC) and its ongoing influence on the markets.
Despite the uncertainties, if crude prices rebound due to anticipated demand recovery, India’s state-run oil marketing companies (OMCs) may face increased costs for raw materials, according to Gnanasekar Thiagaranjan, Director at Commtrendz Research. However, analysts believe that such fluctuations should not significantly impact the long-term profitability of these companies.
In the initial two quarters of the fiscal year, OMCs have demonstrated robust profitability compared to the same period in the previous fiscal year, primarily driven by improved marketing margins. The last quarter saw an enhancement in marketing margins for the three public-sector companies, thanks to discounted Russian crude oil. Concurrently, OMCs maintained stable prices for auto fuels, aiding in the recovery of losses incurred during periods of higher oil prices last year.
Analysts project that OMCs will continue to exhibit healthy marketing and refining margins in the third and final quarter of the financial year 2023-24, provided that crude prices remain within the range of $85-$87 per barrel. The sustainability of these margins hinges on various factors, including global geopolitical developments, demand trends, and the production dynamics within OPEC and non-OPEC countries.
As the oil market navigates through intricate challenges, the resilience of OMCs in managing costs and maintaining profitability remains a critical aspect in the evolving energy landscape. Keeping a close eye on market dynamics and external factors will be crucial for stakeholders in the oil industry to adapt to the unfolding scenario in 2024.