Many brokerages feel that the margins of Indian refiners may come under pressure because of a decline in the Singapore benchmark refining margin.
If the margins remain at the current level in the remaining part of this quarter, margins of companies like Reliance Industries (RIL), Essar Oil and public sector firms like Bharat Petroleum (BPCL), Hindustan Petroleum (HPCL) and Indian Oil (IOC) may be hit, brokerages feel.
The benchmark refining margin declined by a third in the second half of October to $8.6 a barrel after hitting a high of $10.7 a barrel on October 10, as large-scale refining capacities came on stream in the Asian region.
The brokerages expect $1.5 to $2 a barrel decline in refining margins for Indian companies if the present situation persists in the remaining months of this quarter.
Lots of capacities are coming up across continents while demand has failed to keep pace with it. The financial years 2013 and 2014 would see an additional capacity of 1.4 million barrels a day coming on stream while demand is expected to grow by only 0.8 to 0.9 million barrels a day globally, leaving unused capacity of around 0.5 million barrels a day, said Jagdish Meghnani analyst with Emkay Global.