>Singapore GRM at 15-week low; RIL up US$1/bbl WoW but weak- MERRILL LYNCH

■ Singapore GRM halved over last seven weeks to US$5.1/bbl
Reuters’ Singapore GRM has fallen by 51% since the week ended January 27 from US$10.3/bbl to US$5.1/bbl last week. Singapore GRM last week is at the lowest level in 15 weeks. Singapore GRM in 4QTD is now at US$8.0/bbl. It has been hit by a fall in diesel, jet fuel and fuel oil cracks. Fuel oil cracks have declined the most (US$10.7/bbl) in the last seven weeks. Jet fuel and diesel cracks are also down from peak levels in 4Q by US$3.7-5.0/bbl to US$13.7- 13.9/bbl. In the last 2-3 weeks diesel and jet fuel cracks are at the lowest level since Nov-Dec’10.


■ RIL’s theoretical GRM up US$1.0/bbl WoW at US$4.5-5.7/bbl
RIL’s theoretical GRM last week at US$4.5-5.7/bbl is up US$1.0/bbl WoW with higher end of the estimate being at US$0.6/bbl premium to Singapore GRM. RIL has gained from Arab heavy being at US$0.4/bbl discount to Dubai and not producing fuel oil (cracks down sharply). However, RIL’s GRM was boosted most by our assumption that its new refinery uses Souedie crude (API of 24), which was at US$6.3/bbl discount to Dubai. If use of Oriente crude (also API of 24) is assumed, RIL’s GRM last week would be lower at US$3.6-4.7/bbl.


■ RIL’s theoretical GRM in Mar’12 lowest since Dec’09
RIL’s theoretical GRM to date in March 2012 at US$3.9-5.0/bbl is at the lowest level since December 2009.


■ RIL’s 4QTD GRM below Singapore GRM and down YoY
RIL’s theoretical GRM in 4QTD at US$5.3-6.5/bbl is down US$2.7-3.9/bbl YoY (US$9.2/bbl in 4Q FY11). It is also US$1.5-2.7/bbl below Reuters’ Singapore GRM of US$8.0/bbl. RIL’s gain from QoQ product cracks rise is less than that of Reuters’ product slate. Discount to Dubai of crude RIL uses is also QoQ lower.


■ RIL’s 4Q profit down 20-30% YoY at 4QTD GRM
RIL’s 4Q profit works out to Rs37.4-43.1bn at 4QTD theoretical GRM of US$5.3- 6.5/bbl and blended petrochemical margin of US$427/t (down 22% YoY in rupee terms). It would mean 20-30% YoY fall in 4Q profit (4Q FY11: Rs53.8bn). 


■ Downside to RIL’s FY13 EPS 10-20% if GRM at 4QTD level
Our FY13 EPS estimate for RIL assumes its GRM at US$8/bbl. If RIL’s FY13 GRM is at 4QTD FY12 level (ignoring shutdown) of US$5.7-6.8/bbl, its FY13 EPS would be 10-20% below our estimate of Rs66.9.


■ R&M companies GRM up WoW and QoQ
BPCL and HPCL’s theoretical GRM last week was up WoW at US$3.1-3. 2/bbl. Their 4QTD theoretical GRM (including inventory gain) is also up QoQ at US$5.8-5.9/bbl.


To read full report: OIL REFINING & MARKETING