Fitch Ratings said on Thursday that Asian oil refiners will see refining margins narrow from the strong levels seen in the first half of the year, despite generally strong petrol and diesel demand in the region.
The ratings agency also said in their latest report that it expects crude oil prices to remain highly volatile in the short term, exposing refiners to changes in inventory valuations.
“Fitch expects refiners to post large inventory losses in the third quarter of 2015 as crude oil prices have fallen more than 20 percent from the second quarter of 2015,” it said.
“We also expect crude oil prices to be volatile in the short term exposing refiners to large inventory losses,” the report added.
Rating India’s largest refiner state-run Indian Oil Corp at the start of this fiscal at “BBB-/Stable”, Fitch had said: “IOC suffered inventory losses in FY15 as crude oil prices fell sharply. These losses had a one-time effect on profitability in FY15.”
“On the flip side, the lower prices have led to lower inventory levels, which have eased working capital needs and correspondingly reduced short-term debt requirements,” it added.