The Singapore gross refining margin (GRM), an important benchmark of profitability for refining companies, dropped considerably in the December quarter. The measure has averaged at $4.4 per barrel so far this quarter, pointed out ICICI Securities Ltd in a report on 27 December. The report added that the Singapore GRM is at a 33-quarter low. This represents a 28% decline compared to September quarter.
For a refiner, GRM is realization from turning a barrel of crude oil into finished products.
Currently, Singapore GRM is down primarily because of weakness in petrol (or gasoline) cracks, amid a glut in the gasoline market.
Unsurprisingly, the subdued refining environment is expected to reflect adversely in the December quarter earnings of Indian refiners.
“For refiners, Q3 could turn out to be a challenging quarter, with them already facing heavy inventory losses,” pointed out Emkay Global Financial Services Ltd in a report on 12 December.
ICICI Securities estimates Reliance Industries Ltd’s GRM at $6.6-7.2 a barrel for the December quarter till date, hit by naphtha and petrol cracks, which are at 22-36 quarter lows.
