Combination of reduced duties and higher retail prices is essential to combat crude rally: Emkay Global

Coordinated action, including a reduction in excise duty, a reduction in value added tax coupled with an increase in the retail price, is needed to manage rising crude prices, as marketing companies oil companies are already operating on wafer-thin margins, brokerage Emkay Global said. Financial Services said in a report.

On average, petrol and diesel marketing margins are negative Rs 6.5-9.1 per liter and the current surge in global crude prices – $130 per barrel – calls for a possible rise of Rs 28-9. 30 liters of rupees on fuels, the brokerage report said. .

Ongoing hostilities between Russia and Ukraine, along with a lack of new supplies, pushed the price of crude oil to a 14-year high of $130 a barrel on Monday.

“We are raising our Brent price estimate for FY23/24 to $100/80/bbl from $80/$75 while maintaining our long-term assumption at $75/bbl. The average for FY22 should be $80/bbl.”

Keeping the high crude prices in mind, the brokerage has issued a “Buy” call for ONGC shares with a target price of Rs 230. The certificate is currently trading at Rs 172.

Also for Oil India, the brokerage recommended investors to “buy” with a target price of Rs 335. Its current price is Rs 235. In addition, GAIL would also benefit from rising oil prices, a- he added.

“The rise in LPG prices is also necessary as the current under-recovery of Rs 200 per cylinder on a total national basis of 25 mmtpy implies a loss of Rs 350 billion and it may further inflate.”

(With contributions from IANS)

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Posted: Thursday March 10th 2022, 9:00 PM IST