New Delhi: Global liquefied natural gas (LNG) prices are expected to remain elevated heading into winter amid lower European gas storage levels, raising affordability concerns for India's domestic market, according to a report by Jefferies cited by news agency ANI on Friday. Spot LNG prices rose 6 per cent week-on-week to an average of $32 per million British thermal units (mmBtu).

Source: ANI via DevDiscourse

The report highlighted that European Union gas storage levels currently stand at 75 per cent, compared with 83 per cent during the same period last year, indicating tighter supply conditions ahead of the winter season. "Domestic affordability is stretched at current prices," the report noted, adding, "Hence, we expect gas prices to remain elevated as we head into winter."

Source: ANI via DevDiscourse

Crude oil costs are squeezing India at the same time. Freight costs now account for more than 25 per cent of the landed cost of crude oil, compared with just 3 per cent before the war, and discounts on Russian crude have narrowed significantly, with Russian Urals trading at a discount of $2 per barrel to Brent, compared with $14 per barrel at February-end, Jefferies said. The discount on Dubai crude relative to Brent widened sixfold week-on-week to $4 per barrel.

Source: New Kerala (ANI)

Against this backdrop, crude procurement costs for Indian oil marketing companies (OMCs) remain broadly in line with the Indian crude basket price of $118 per barrel, resulting in substantial marketing losses on petrol and diesel. "Procurement costs for OMCs are similar to the Indian crude basket price of US$118/bbl, resulting in steep losses," Jefferies said, adding, "Current loss of petrol/diesel is Rs25/37 per lt based on 15-day average pricing."

Source: ANI via DevDiscourse

One offset in the report was petrochemicals: average margins across polyethylene (PE), polypropylene (PP) and polyethylene terephthalate (PET) have increased 55 per cent compared with February-end levels, aiding Reliance's oil-to-chemicals profitability, according to Jefferies. The figures are the brokerage's estimates of marketing margins, not announced retail price changes — pump prices will depend on whether the OMCs absorb the losses or pass them on.

Source: 7Globe (Jefferies report)

$32/mmBtuAverage spot LNG price, up 6% week-on-week, per Jefferies
75% vs 83%EU gas storage now vs same period last year
Rs 25 / Rs 37OMC loss per litre on petrol / diesel, 15-day average pricing
$118/barrelIndian crude basket price OMC procurement costs track
$2 vs $14Russian Urals discount to Brent now vs February-end
>25%Freight share of landed crude cost, vs 3% before the war