BLBG:ONGC’s Hazarika Expects Oil to Decline Further, Boost Profit
A.K. Hazarika, Chairman of Oil & Natural Gas Corp., India’s biggest energy explorer, expects profit in the three months ending Sept. 30 to be boosted as declining crude prices cut its fuel subsidy bill.
Oil plunged today after Standard & Poor’s lowered the U.S. credit rating, stoking concern that an economic slowdown in the world’s biggest crude consumer will worsen and cut fuel demand. Brent oil for September settlement was at $106.52 a barrel on the London-based ICE Futures Europe exchange after sliding as much as 2.9 percent to $106.20.
ONGC gives discounts to state refiners as partial compensation for selling fuels below cost. Hazarika, based in New Delhi, spoke by telephone.
On profit outlook:
“Oil at this level is great news for us and the refiners. It has come as a shot in the arm for us.
‘‘This will reduce our subsidy burden and help us sell crude closer to market prices and improve our margins. If oil falls further, I think our final selling price for crude in the second quarter could be close to $60 a barrel.
‘‘The lower oil prices and the government allowing higher diesel and other fuel prices in June are definitely going to help our profit figures in the second quarter.’’
ONGC sold crude at $48.76 a barrel in the first quarter, according to a July 28 statement. The discount given to state refiners doubled from a year earlier to 120.5 billion rupees.
The government increased prices of diesel, kerosene and cooking fuel on June 25 for the first time in a year in a bid to reduce losses at state refiners.
On crude oil price outlook:
‘‘I think Brent crude will come down further to around $100 a barrel. Demand isn’t very strong and the U.S. downgrade and problems in Europe aren’t helping markets. Sentiments aren’t very good. This could push down oil further.
‘‘The thing is Indian companies will start to benefit if oil holds at these levels for a couple of weeks at least. That will reduce input costs and improve margins. It’s not all bad news for companies in general.’’
To contact the reporter on this story: Rakteem Katakey in New Delhi at rkatakey@bloomberg.net
To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net
