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Indian refineries' profitability is dependent on cost recovery via an increase in the retail prices, said India Ratings and Research (Ind-Ra).

Notably, oil marketing companies have not increased retail prices of petrol and diesel since November 2021.

However, the trend might change as high Crude oil prices have kept prices of key refinery-based products elevated in Q4FY22.

At present, the Brent-indexed Crude oil is priced over $91 per barrel.

Besides, Ind-Ra cited that rise in gross refining margins (GRMs) of Indian refiners in Q3FY22 came on the back of an increase in the "crack spreads" of key products as well as higher inventory gains.

Consequently, the Q3FY22 GRMs for Indian refining companies averaged at $9.4 per barrel Ain line with Singapore GRMs.

Furthermore, the agency attributed the trend to the demand pickup seen globally on account of the restoration of transport activities, gas switching to oil due to high LNG prices, relaxation of air travel restrictions and a higher winter season heating demand.

"Domestic consumption of petroleum products increased to 18.4 million tonnes in December 2021 from 15.9 million tonnes during September 2021, almost reaching the pre-covid level of 18.8 million tonnes in December 2019," the agency said.

"The refinery throughput also increased in response to the increase in demand to 4.72 million bbl per day during 9MFY22 from 4.27 million bbl per day during 9MFY21."