Oil Margins – Refining margin strong; auto losses zoom :: Anand Rathi

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Oil Margins – Vol. 02/11
Refining margin strong; auto losses zoom
Refining margin over 16-31 Jan was US$7.3/bbl, up US$0.9/bbl
from previous fortnight as middle distillate cracks strengthened
on the back of a strong winter demand. Based on average global
gasoil and gasoline prices during 16-31 Jan, auto-fuel underrecoveries
over 1-15 Feb are likely to be `8.6/litre vs. `7.6/litre
the previous fortnight as losses on diesel rose to `9.5/litre.

 Strong refining margin on high middle-distillate crack.
Refining margin over 16-31 Jan ’11 was US$7.3/bbl, up
US$0.9/bbl from previous fortnight as middle distillate cracks
strengthened on the back of a strong winter demand. Margin is
high at US$6.9/bbl since beginning-4QFY11 till date, vs.
US$5.5/bbl in 3QFY11; we estimate margin to average at
US$4.75/bbl in FY12 and US$5.5/bbl in FY13. Brent Dubai
spread was US$4.2/bbl, up US$0.2/bbl from the previous
fortnight, adding to complex refiners’ margin.
 Auto-fuel losses zoom. Based on average global gasoil and
gasoline prices during 16-31 Jan, auto-fuel under-recoveries over
1-15 Feb are likely to be `8.6/litre vs. `7.6/litre the previous
fortnight as losses on diesel rose to `9.5/litre. We estimate autofuel
breakeven crude price to remain flat at US$73.7/bbl for 1-15
Feb (vs. US$73.5/bbl the previous fortnight). Cooking-fuel
breakeven crude price is likely to see slight decline in Feb ’11 due
to decline in LPG crack.
 Crude price continues to be strong. For 16-31 Jan, the Brent
crude price was at US$97.1/bbl, up US$1.6/bbl from the previous
fortnight, on account of a colder-than-normal winter and supply
concerns due to the Egypt crisis.