Hormuz risks may hit OMC margins: Rating agencies
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New Delhi: Profit margins and cash flows of state-run oil marketing companies (OMCs) such as IOC, BPCL and HPCL could come under pressure as global crude prices remain volatile amid tensions linked to Iran, according to rating agencies S&P Global Ratings, Fitch Ratings and Moody’s Ratings.
Crude oil briefly crossed USD 100 per barrel earlier this week following disruptions around the Strait of Hormuz, a key shipping route that handles about one-fifth of global oil and LNG trade. Prices later eased to around USD 88 per barrel on Wednesday, though volatility remains elevated due to geopolitical risks.
The rating agencies said Indian OMCs may keep retail prices of petrol and diesel largely unchanged to help contain inflation, limiting their ability to pass on higher crude costs to consumers. This could squeeze marketing margins and weaken operating cash flows. According to Moody’s, domestic fuel prices have remained largely steady since April 2022 despite swings in global oil and gas prices, reflecting the government’s influence over retail pricing. The three OMCs together operate nearly 90 per cent of fuel retail outlets in the country,. While upstream producers such as ONGC may benefit from higher crude prices, downstream fuel retailers face cost pressures when global prices rise but retail pump rates remain unchanged.
