India's average crude oil purchase price has fallen below pre-war levels, according to data reported in June 2024 [1].
This decline reduces the cost of raw materials for the nation's energy sector and influences the profitability of state-run oil marketing companies. Lower purchase costs, combined with specific government policy shifts, create a more favorable environment for domestic fuel distributors.
The average price of Indian crude purchases reached $68.86 per barrel [1]. This price drop follows a period of volatility and is attributed to easing geopolitical tensions in the Strait of Hormuz and a tentative peace deal [2, 3].
ICICI Securities said it remains bullish on Indian oil marketing companies, including Indian Oil Corporation (IOC), Bharat Petroleum Corporation Limited (BPCL), and Hindustan Petroleum Corporation Limited (HPCL) [1, 4]. The firm said elevated marketing margins are a primary reason for this positive outlook [4].
Market reactions were noted on June 25, 2024, as Indian shares advanced following the slip in oil prices [2]. The downward trend in crude costs comes as the Indian government implements several regulatory changes to the energy market [1, 4].
Among these changes, the government revised the windfall tax on fuel exports [4]. Additionally, the administration cut prices for aviation turbine fuel (ATF), and commercial liquefied petroleum gas (LPG) [4]. These adjustments, paired with the lower cost of crude, affect how OMCs manage their pricing and tax burdens.
While some reports noted ICICI Securities' bullish stance despite periods of rising crude prices, the most recent data indicates a significant drop in the purchase basket [1, 4].
“India's average crude oil purchase price has fallen below pre-war levels”
The convergence of lower crude import costs and revised windfall taxes suggests a period of improved liquidity for India's state-run oil marketers. By reducing the cost of the crude basket while maintaining elevated marketing margins, OMCs can better absorb price shocks or increase dividends, provided geopolitical stability in the Strait of Hormuz persists.
