Refiners brace for challenges: GRMs dip, marketing margins under pressure in FY25

Refiners Challenge: After a stellar performance in FY23, Indian refiners saw a moderation in Gross Refining Margins (GRMs) in FY24. From the lofty heights of $16 to $18 per barrel, GRMs dipped to a more modest range of $10 to $12 per barrel. Factors contributing to this moderation included a narrowing discount on Russian crude and a reduction in product cracks, a recent report by CareEdge said. 

Resilience Amidst Moderation

Despite the moderation in GRMs, Indian refiners continued to outperform the benchmark Singapore GRM, showcasing their resilience and adaptability in the face of changing market dynamics. Operating profits soared in FY24, driven by higher marketing margins, even as average crude oil prices saw a reduction from the previous year.

Russian Crude Influence

The influence of Russian crude oil in India's oil imports witnessed a significant surge in FY24. Starting from less than 2 per cent, the share of Russian crude in India's imports skyrocketed to around 35 per cent, reaching a peak of 40 per cent by April 2024. This increase was attributed to subdued demand from China and disruptions in Russian refining infrastructure.

Looking ahead to FY25, CareEdge Ratings anticipates further moderation in GRMs for Indian refiners, with expectations set at $6 to $8 per barrel. Factors such as contracting discounts on Russian crude and lower product cracks are likely to contribute to this forecast. Additionally, marketing margins are expected to face substantial pressure in FY25, driven by recent retail price cuts and anticipated rises in crude oil prices amidst geopolitical tensions.

While moderating GRMs and pressure on marketing margins pose immediate hurdles, there are also opportunities for innovation and adaptation. Refiners may explore strategies to enhance operational efficiency, optimise supply chains, and capitalise on emerging market trends to maintain profitability and sustainability in the long run.