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New Delhi: India’s petroleum product demand is projected to grow by 3%-4% in the financial year ending March 2025 (FY25), supported by rising consumer, industrial, and infrastructure demand, Fitch Ratings said in a report. The projection aligns with Fitch’s estimate of a 6.4% GDP growth for FY25.
The demand growth will primarily be driven by diesel and petrol consumption, which account for a significant portion of India’s petroleum product usage. This follows increases of 3% during the first seven months of FY25 and 5% in FY24.
Refinery and marketing margins outlook
Fitch expects Indian oil marketing companies (OMCs) to face pressure on refining margins, which are projected to fall below mid-cycle levels in FY25. The decline is attributed to regional oversupply, lower product cracks, and reduced benefits from price differences between crude varieties.
Despite the challenges in refining, marketing margins are anticipated to remain healthy, driven by lower Brent crude oil prices compared to FY24. These strong marketing margins are expected to offset some of the pressures from reduced refining margins for OMCs.
Pure refiners, such as HPCL-Mittal Energy Limited (HMEL), are expected to face greater profitability challenges due to their lack of marketing operations. HMEL’s low rating headroom for FY25 is forecasted to improve in FY26 as refining margins recover to mid-cycle levels amid easing regional oversupply and declining Brent crude oil prices, Fitch noted.
The report highlights the interplay between refining and marketing operations for Indian OMCs, emphasizing that strong marketing performance will mitigate some of the downside risks from declining refining margins in the near term.>
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