Cost of raw materials increases. Reliance reports a lower profit margin than what was expected saying recession fears overtaking oil market fundamentals.
Reliance recently warned about a Global recession that could reduce the profit margins for oil refining, as the owner of the company reports a lower-than-expected profit.
“Recession fears are overtaking oil market fundamentals, resulting in lower prices and margins,” in a post-earnings call on Friday, Reliance’s Joint Chief Financial Officer V. Srikanth made the statement.
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The past two weeks have seen a dip in crude oil prices; if they continue to decline this week, it would be the third weekly decline and the longest streak of declines this year. The main cause of the decline has been concerns that a worldwide recession may reduce demand for fuel.
A possible reason for the Recession according to Reliance
In its upcoming update later this month, the International Monetary Fund will “significantly” lower its forecast for global economic growth, according to Ceyla Pazarbasioglu, the organization’s director for strategy, policy, and review.
The owner further added in the information that the windfall profits for oil refiners like Reliance have garnered considerable attention, but there are also a number of challenges, such as increased operating costs because of rising freight and input costs.
Costs of raw materials increased by 76% in the June quarter.
Reliance’s refining sector has recently experienced growth as a result of its acquisition of cheaper Russian oil that western consumers avoided due to the ongoing conflict in Ukraine. This is happening for the past few months.
At that time, it was exported at a premium and making a sizable profit. Now, that advantage is waning.
India imposed a levy on gasoline exports and crude oil output on July 1 in an effort to capture windfall profits from rising prices, but this week it was reduced. According to Srikanth, this tax will lower the nation’s gasoline exports.
