[T.S.R:17359] Ongc-Screwing The FPO By Changing The Subsidy Sharing Mechanism; Sell All PSUs

There Goes The ONGC FPO

Despite a US$8/bbl decline in Brent crude last fortnight and a `5/litre rise in petrol, auto-fuel under-recoveries for 16-31 May remained high, at `13/litre, as losses on diesel/petrol were `14.7/`5.2 a litre. The GoM is expected to meet this week to decide on increases in prices of diesel and cooking fuel.

n       High under-recoveries continue despite petrol price hike. Despite a US$8/bbl decline in Brent crude last fortnight and a Rs5/litre rise in petrol, auto-fuel under-recoveries for 16-31 May continued to be high at `13/litre as losses on diesel/petrol were `14.7/`5.2 a litre. We estimate auto-fuel breakeven crude at US$77.8/bbl (petrol: US$101; diesel: US$72), up US$1 from the previous fortnight due to the recent increase in petrol prices.

n       Diesel price-hike imminent. The GoM (Group of Ministers) is expected to meet this week to decide on price hikes in diesel and cooking fuel. We believe diesel would be upped by `2-3/litre, with only a marginal increase in cooking-fuel prices. Diesel has a 4.67% weight in the wholesale price index, and an indirect impact of a similar magnitude would be felt in the next 3-4 months.

n       Refining margin strong; complex refiners gain. The refining margin for 1-15 May continued to be strong, at US$12.1/bbl, due to the Mississippi floods which led to shutdown of some US refining capacity. Refining margin for 1QFY12 till now has been US$9.7/bbl compared with US$7.4 in 4QFY11. The Brent-Dubai spread was strong, at US$5/bbl, adding to complex refiners' margins.
 

Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

 

Nothing in this article is, or should be construed as, investment advice.

 

 

 

 

 

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