1. Near-term headwinds

Near-term headwinds

India's net diesel exports in Mar-17 reached five month highs, as a result of the ramp-up at recently commissioned refinery expansions and weak Q1 CY17 consumption (diesel demand fell 4% y-o-y).

By: | Updated: April 25, 2017 4:54 AM
India’s net diesel exports in Mar-17 reached five month highs, as a result of the ramp-up at recently commissioned refinery expansions and weak 1Q CY17 consumption. (Reuters)

India’s net diesel exports in Mar-17 reached five month highs, as a result of the ramp-up at recently commissioned refinery expansions and weak Q1 CY17 consumption (diesel demand fell 4% y-o-y). This export increase is despite both BPCL’s Mumbai and HMEL’s Bhatinda refineries being shut for a part of the month. While the former was shut for regular maintenance, the latter saw a shutdown prior to commissioning of a 25% capacity expansion.

Ramp-up at both IOCL Paradip and BPCL Kochi continues to be promising, with the refineries reaching ~95/90% utilisations. Next quarter could see: (i) secondary units at these refineries ramp-up fully and (ii) HMEL’s capacity expansion coming online. Thus, we expect India’s Q2 CY17 diesel net exports to be up ~90 kbpd (20%) y-o-y. This equals a large ~10% of Asia+Middle East diesel surplus and can be a headwind for regional diesel margins near term.

Post this ramp-up, we expect refining fundamentals to strengthen, with regional utilisations increasing ~65 bp p.a. in both CY17/18. Refining accounts for 40-55% of OMC Ebitda and robust margins (6-2-3-1 at US$10.5/bbl) should provide good EPS support.

You May Also Want To Watch:

India’s net diesel exports at five-month highs

India’s net diesel exports in Mar-17 reached five month highs, as a result of the ramp-up at recently commissioned refinery expansions and weak 1Q CY17 consumption. This export increase is despite both BPCL’s Mumbai and HMEL’s Bhatinda refineries being shut for a part of the month. While the former was shut for regular maintenance, the latter saw a shutdown prior to 25% capacity expansion.

Near term headwinds but refining fundamentals robust

Ramp-up at IOCL Paradip and BPCL Kochi is promising, with both reaching 90-95% utilisation. We see India’s Q2CY17 diesel net exports up ~90 kbpd (20%) y-o-y. Post this ramp-up, we expect refining fundamentals to strengthen, with regional utilisations increasing ~65 bp p.a. in both CY17/18. Refining accounts for 40-55% of OMC Ebitda and robust margins (6-2-3-1 at $10.5/bbl) should provide good EPS support.

Calculate your income tax post budget 2018 through this Income Tax Calculator, get latest news on Budget 2018 and Auto Expo 2018. Like us on Facebook and follow us on Twitter.

  1. No Comments.

Go to Top