In the December quarter, RIL’s gross refining margin (GRM)—or what it earns from processing each barrel of crude oil—touched a 16-quarter low of $8.8. However, the refinery processed 18 million tonnes of crude oil during the quarter, higher than 17.7 million tonnes in the September quarter.

JPMorgan India Pvt. Ltd sounded gloomy in a 18 January report: “Overall, RIL did highlight that while gasoline remains under pressure, the outlook is also not very robust at this point, given weak demand and higher exports out of US and China. In our view, the overall refining environment as of now is weak, given a combination of weak demand and higher Chinese exports."

A day earlier, at its earnings announcement, responding to a query on whether RIL’s double-digit GRMs are history, joint chief financial officer Srikanth Venkatachari said the company is not “as negative" on GRMs, while adding it is tough to say where GRMs would be headed.

RIL operates the world’s biggest single-location refinery at Jamnagar in Gujarat, with the technology to process cheaper, heavier crude.

Thanks to its technical prowess, it has traditionally enjoyed higher GRMs than Singapore GRMs, considered a global benchmark. In the December quarter too, RIL’s GRM was $4.5 higher than the Singapore benchmark.

During the last quarter, oil prices fell sharply, with Brent prices averaging at a five-quarter low of $67.5 per barrel. During the period, Singapore GRM fell to an eight-year low of $4.3.

“The prognosis for refining margins continues to appear weak in 2019, before new International Maritime Organization (IMO) bunker fuel regulations kick in 2020, on 2,000 barrels of oil per day (mbpd) of impending capacity addition, as against a demand growth of just 1.4mbpd," said Antique Stock Broking Ltd in its report. RIL too is pinning hope on the IMO norms to lift its GRMs. This, however, would take effect only in January 2020. Under IMO regulations issued in October 2016, ships must shift to fuel oil with sulphur content below 0.5% in January 2020, against the present 3.5%. The tougher quality standards for fuel oil powering ships are expected to boost RIL’s refining margins.

“As a result of our robust and flexible configuration, we are also uniquely positioned to take advantage of emerging opportunities in view of IMO 2020," Mukesh Ambani, chairman and managing director of RIL, had said at the company’s 41st annual general meeting on 5 July 2018. RIL has already upgraded to these standards as part of its massive refinery expansion it undertook a few years ago. Fuel oil, also called furnace oil, is a by-product of crude oil refining. It is used in ships, and for steam boilers in power plants and in industrial plants. With the impending shift to low-sulphur fuel oil, demand for the same is expected to rise.

RIL, however, won’t be the sole winner due to the shift. State-owned refiners—Indian Oil Corp. Ltd, Bharat Petroleum Corp. Ltd and Hindustan Petroleum Corp. Ltd—too stand to benefit, as they too have already begun producing low-sulphur fuel.