Global recession can hurt oil refining margins said Reliance Industries Ltd. (RIL) as it flagged the possibility of more pain ahead, the Bloomberg reported on Monday. Mukesh Ambani-led RIL, the world's largest refining complex, posted a lower-than-expected profit on Friday.
According to the report, Reliance’s Joint Chief Financial Officer V Srikanth said in a post-earnings call on Friday, “Recession fears are overtaking oil market fundamentals, resulting in lower prices and margins.”
While there has been a lot of spotlight on the windfall gains for oil refiners like Reliance, there are also several headwinds such as higher operating expenses due to soaring freight and input prices, he said. Cost of raw materials jumped 76 per cent in the June quarter.
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The International Monetary Fund (IMF) will cut its global economic growth outlook “substantially” in its next update later this month, according to Ceyla Pazarbasioglu, its director for strategy, policy and review.
She said that surging food and energy prices, slowing capital flows to emerging markets, the ongoing pandemic, and a slowdown in China are making it “much more challenging”.
Crude oil prices have slipped in the past two weeks and if they fall this week, it will be the third weekly drop, the longest run of declines this year, primarily due to fears that a global slowdown may dampen demand for fuels.
In the past few months, Reliance’s refining business was boosted as it secured cheaper Russian oil shunned by western buyers amid the ongoing war in Ukraine. It was then exporting at higher prices and pocketing a healthy profit. That benefit is now eroding.
On July 1, India slapped a tax on fuel exports and crude oil production to tap windfall gains from surging prices but slashed it this week. Srikanth said this tax will reduce fuel exports from the country.