Indian Oil Corporation (IOCL) reported a net profit of Rs 1,910.8 crore on a standalone basis for the quarter ended June 30, recording a 46.9% drop from the same period a year ago. The state-run oil refining and marketing company attributed the fall in profit to inventory losses, stemming from fluctuations in global oil prices.
The inventory loss in the quarter was Rs 3,196 crore against gains of Rs 2,362 crore in the corresponding period a year ago, said IOCL chairman SM Vaidya.
Prices of the Indian basket of crude in the quarter touched ultra-low levels of $16.2/barrel, lowering the valuation of the crude oil stocked by the company, leading to inventory losses of $3.05/barrel. However, the net profit of IOCL would have been lower had its gross refining margin not increased 88% year-on-year to $4.27/barrel, thanks to the continuous rise in retail prices of petrol and diesel in the last month of the quarter, when demand for auto fuels revived with the gradual lifting of the lockdown to contain the coronavirus outbreak.
The country’s biggest refiner and fuel retailer, doesn’t expect its capacity utilization to return to pre-pandemic levels in the near future, IOC’s chairman S.M. Vaidya told the media. IOC had been gradually boosting its refinery capacity utilization since May, but utilization has been down in recent weeks as many states in India re-imposed localized lockdowns, after the nationwide lockdown in April-May, following a surge in COVID-19 cases.
IOC’s capacity utilization has dropped to 75 percent these days, from around 93 percent in the first week of July. At the end of June, Indian Oil Minister Dharmendra Pradhan had said that fuel demand in India was set to rebound to pre-crisis levels by the end of September. Yet, India’s crude oil imports slumped in June to their lowest levels since 2011, with oil refiners buying less crude because of maintenance and weaker demand. Indian refiners are now cutting processing rates because fuel demand – up from the lows in April and May – has slowed this month as fuel prices are higher and parts of India are again under local lockdowns, while the monsoon rains are stalling economic activity and transport.