Risk premium on oil to go up: Icra
Thus, their net realisation and cash accruals will improve unless the extant under-recovery sharing formula is changed.
Kolkata: The coordinated drone strike on September 14, on Saudi Arabia’s key oil facilities expected to add a geo-political risk premium to oil prices and is credit negative for Indian consumers.
“Oil prices should factor in sizeable geo-political risk premium, which will be negative for Indian consumers. Industrial consumers may face pressure on the profitability with rise in input prices of crude derivatives besides possible increase in power and fuel cost. The retails consumers will face increase in inflation driven by higher transportation and logistics cost,” Icra report indicated.
As per Icra’s estimates, till an Indian Basket crude price of nearly $70-75/bbl, the PSU upstream companies may not have to bear material under-recoveries. Thus, their net realisation and cash accruals will improve unless the extant under-recovery sharing formula is changed.