New Delhi, May 21 (IANS): The resurgence of Covid-19 is expected to obstruct the recovery in domestic consumption of petroleum products, said India Ratings and Research (Ind-Ra) on Friday.

In a report, the ratings agency cited that India's domestic consumption of petroleum products declined 1.8 per cent month on month to 4.4 million barrels per day (mb/d) in March 2021, after achieving FY21's peak level of 4.5 mb per day in February 2021.

"The mom decline is likely to have been higher in the months of April and May due to the fresh restrictions imposed to curb the second covid wave," the agency said.

"However, Ind-Ra opines that the consumption levels to have remained higher on a yoy basis due to the lower base effect caused by the more stringent restrictions imposed during the same period last year."

As per the report on a cumulative basis, production, domestic consumption and exports on a YoY basis declined by 11 per cent, 8.7 per cent and 13.3 per cent, respectively, during FY21.

Similarly, domestic crude production fell 3.1 per cent YoY.

"During March 2021, the production volumes of Oil and Natural Gas Corporation, Oil India and fields under production-sharing contracts decreased 3.7 per cent yoy, 1.8 per cent yoy and 2.3 per cent yoy, respectively."

"Domestic production declined 1.6 per cent mom during the month."

On a cumulative basis, a fall of 4.7 per cent YoY in domestic crude production was registered during FY21.

Besides, the report pointed out that in March 2021, natural gas (NG) production increased 11.3 per cent YoY and NG production volumes from private or joint venture fields increased 118.4 per cent YoY while the production from Oil and Natural Gas Corp and Oil India fell by 3.9 per cent and 0.7 per cent respectively.

"The increase in domestic consumption was largely led by a 28.1 per cent yoy and 21 per cent yoy increase in consumption by the city gas distribution and power segments, respectively, in March 2021."

Furthermore, LNG import volumes increased 3.8 per cent YoY while it declined 4.3 per cent MoM in March 2021.

"Ind-Ra expects continued subdued crack spreads in both gasoil and gasoline will impact the overall gross refining margins of Indian oil marketing companies (OMCs), though they have healthy complexity and low operating costs per barrel."

"Gasoil and gasoline are the two key products of Indian refiners, accounting for around 65 per cent of their product slate."

In addition, Ind-Ra said refining and marketing segment would continue to dominate the overall profitability in the near term, while OMCs have been consistently increasing their pipeline capacity to reduce transportation costs and venturing into new business segments such as petrochemical and city gas distribution to diversify its revenue streams.

"With the expectations of a subdued recovery in the gross refining margins and continuance of healthy marketing margins, Ind-Ra believes that the marketing segment would be the principal contributor to OMCs' profitability in FY22 and witness a higher demand once the economy recovers."

"Further details are mentioned in Marketing Segment to Continue Driving OMCs' Profitability in FY22."