Fitch Ratings has projected 3 to 4% growth in India’s petroleum product demand in FY25. It further stated that the projection will be driven by rising consumer, infrastructure and industrial demand. The estimation aligns with Fitch’s projection of a 6.4% Gross Domestic Product (GDP) growth for FY25.
The demand growth is expected to be primarily led by diesel and petrol consumption. This follows a 3% rise during the first 7 months of FY25 and 5% increase in FY24.
According to Fitch, the Indian oil marketing companies (OMCs) are likely to undergo pressure on refining margins. It is expected to drop below mid-cycle levels FY25 due to lower product cracks, regional oversupply and reduced benefits from price differences between crude types.
Despite refining challenges, marketing margins are estimated to stay healthy, driven by lower Brent crude oil prices compared to last year. Pure refiners, such as HPCL-Mittal Energy Limited (HMEL), may face higher profitability challenges. This is attributed to their lack of marketing operations.
Fitch noted that the HMEL’s low rating headroom for FY25 is likely to improve by FY26 amid easing regional oversupply and falling Brent crude oil prices.
Fitch Report further highlights the balance between refining and marketing operations for Indian OMCs. It points out its strong marketing performance role in mitigating a few downside risks from falling refining margins in the short term.
