Billionaire brothers Shashikant and Ravikant Ruia, who run India’s second-biggest oil refinery, will increase fuel sales at home as capacity additions in China and the Middle East shrink export margins.
Essar Oil Ltd. (ESOIL) will reduce overseas sales from its 400,000-barrel-a-day plant as it predicts local demand for gasoline and diesel will rise in the year ending March 31, Managing Director Lalit Kumar Gupta said in an interview. The end of an above-normal monsoon in India will help revive diesel demand in Asia’s second-biggest energy consumer, he said.
“Domestic sales will rise and protect margins,” Gupta, 53, said by phone from New Delhi. “Demand in India will increase, and local refineries will be needed.”
New processing capacities in China and the Middle East are set to increase supplies of petroleum products to Asia and erode earnings of export-focused refineries including Essar Oil and Reliance Industries Ltd. (RIL), controlled by tycoon Mukesh Ambani. The coming jump in output has forced Asian oil companies including Japan’s JX Holdings Inc. (5020) and South Korea’s SK Innovation Corp. (096770) to also cut their profit estimates.
“Huge capacity additions coming in Asia over the next one year will weigh on global margins,” Vinay Nair, an analyst at Karvy Stock Broking Ltd. said from Mumbai. “Although Essar Oil is focusing on the domestic market, it isn’t immune to global margin risks.” He doesn’t rate Essar shares.
Source:- bloomberg.com
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