Pandemic impact on fuel products may weigh on oil sector in the 1st quarter
Energy shares have climbed over the past three months, but Reliance Industries Ltd stood apart as its shares touched an all-time high on Friday. While RIL has jumped on the back of recent stake sales in its telecom arm, the spotlight will shine on the energy segment when it reveals Q1 results this week. As such, covid-led demand disruptions have constrained margins and tapered expectations in the segment.
The general refining environment was restrained last quarter as the pandemic-induced restrictions curtailed demand for fuel products. Margins of all refiners will bear the brunt. Benchmark Singapore refining margins were estimated to have dropped to a negative $0.9 a barrel in the June quarter. Nevertheless, higher discounts from West Asia would alleviate the blow to some extent. Nomura Financial Advisory and Securities (India) Pvt. Ltd expects RIL’s gross refining margin at $6.1 a barrel for the June quarter, which would be the lowest in a decade. “Realised margins would also be lower due to lower domestic sales and higher exports,” wrote Nomura analysts in a 22 July report.
