Posts
>OIL & GAS (MERRILL LYNCH)
Auto fuel marketing margins set to plunge deeply in the red
■ R&M companies outlook worsening; retain underperform
Refining margins continue to remain weak. Auto fuel marketing margins, which are minus Rs0.2/l in June 1-15, are expected to slump to minus Rs2.5/l from June 16. A 12-18% price hike would be required to bring auto fuel margins to normal levels. There may be no price hike for 5-7 weeks as the government mulls freeing prices. R&M companies FY10E earnings outlook has deteriorated even as investors are enthused by hopes of reforms. We retain underperform on
R&M companies.
■ Auto fuel marketing margin deeply in the red (-Rs2.5/l)
Gasoline and diesel prices are up 8-15% in June 1-5 to US$74.2-76.2/bbl from levels in May 16-31. This steep price rise is expected to plunge auto fuel margins steeply in to the red at minus Rs2.5/l. Diesel margins are set to slump in to the red at Rs1.9/l from June 16. Gasoline margins have been in the red since April 2009 but they are likely to slump deep in to the red to Rs4.9/l from June 16.
■ FY10E margin may slip 18% to Rs0.9/l even if prices freed
We are assuming FY10E auto fuel margin to be Rs1.1/l. Average auto fuel margin up to June 15 is Rs0.65/l. 1Q margin will slip to just Rs0.1/l if auto fuel margin for June 16-30 is indeed minus Rs2.5/l. FY10E average will decline to Rs0.9/l even if auto fuel prices are freed and auto fuel margins rise to Rs1.2/l from 2Q.
■ 12-18% price hike required in auto fuels for normal margins
At current prices 12-18% (Rs4.0-8.0/l) price hike is required in diesel and gasoline to eliminate losses and ensure normal level of marketing margins of Rs1.2/l. A 10% hike in gasoline and diesel prices would take inflation to 6% by March 2010. Thus a steeper hike would mean risk of higher inflation than 6%.
■ No hike before decision on pricing freedom in 5-7 weeks?
The petroleum minister had indicated on May 29 that government approval for freeing of auto fuel prices would be sought in 6-8 weeks. One wonders whether this means no price hikes for another 5-7 weeks until government decides. If regional prices sustain at current levels pricing freedom would mean 12-18% price hikes, which may be difficult to implement, given inflation concerns.
■ Singapore refining margin US$4.6/bbl in 2Q09
Reuters’ Singapore refining margins average to date in 2Q 09 is US$4.6/bbl vis-àvis US$5.5/bbl in 1Q09. US refiner Valero, which made a profit of US$309m in 1Q09, on June 2 guided that it would incur loss of US$261m in 2Q09.
To see full report: OIL & GAS
■ R&M companies outlook worsening; retain underperform
Refining margins continue to remain weak. Auto fuel marketing margins, which are minus Rs0.2/l in June 1-15, are expected to slump to minus Rs2.5/l from June 16. A 12-18% price hike would be required to bring auto fuel margins to normal levels. There may be no price hike for 5-7 weeks as the government mulls freeing prices. R&M companies FY10E earnings outlook has deteriorated even as investors are enthused by hopes of reforms. We retain underperform on
R&M companies.
■ Auto fuel marketing margin deeply in the red (-Rs2.5/l)
Gasoline and diesel prices are up 8-15% in June 1-5 to US$74.2-76.2/bbl from levels in May 16-31. This steep price rise is expected to plunge auto fuel margins steeply in to the red at minus Rs2.5/l. Diesel margins are set to slump in to the red at Rs1.9/l from June 16. Gasoline margins have been in the red since April 2009 but they are likely to slump deep in to the red to Rs4.9/l from June 16.
■ FY10E margin may slip 18% to Rs0.9/l even if prices freed
We are assuming FY10E auto fuel margin to be Rs1.1/l. Average auto fuel margin up to June 15 is Rs0.65/l. 1Q margin will slip to just Rs0.1/l if auto fuel margin for June 16-30 is indeed minus Rs2.5/l. FY10E average will decline to Rs0.9/l even if auto fuel prices are freed and auto fuel margins rise to Rs1.2/l from 2Q.
■ 12-18% price hike required in auto fuels for normal margins
At current prices 12-18% (Rs4.0-8.0/l) price hike is required in diesel and gasoline to eliminate losses and ensure normal level of marketing margins of Rs1.2/l. A 10% hike in gasoline and diesel prices would take inflation to 6% by March 2010. Thus a steeper hike would mean risk of higher inflation than 6%.
■ No hike before decision on pricing freedom in 5-7 weeks?
The petroleum minister had indicated on May 29 that government approval for freeing of auto fuel prices would be sought in 6-8 weeks. One wonders whether this means no price hikes for another 5-7 weeks until government decides. If regional prices sustain at current levels pricing freedom would mean 12-18% price hikes, which may be difficult to implement, given inflation concerns.
■ Singapore refining margin US$4.6/bbl in 2Q09
Reuters’ Singapore refining margins average to date in 2Q 09 is US$4.6/bbl vis-àvis US$5.5/bbl in 1Q09. US refiner Valero, which made a profit of US$309m in 1Q09, on June 2 guided that it would incur loss of US$261m in 2Q09.
To see full report: OIL & GAS
0 comments:
Post a Comment