Here's why refining stocks like Chennai Petro, MRPL buzzing in trade

Supply crunch shortage is seen in refining capacity overall and this is the reason why crack spreads; crack spreads are basically the spreads on products that have gone up, and this is the reason why Singapore GRMs have hit a 4 year high and this is positive for all the refining companies.

To give some perspective, Chennai Petroleum Corporation is up 75 percent year to date (YTD) and up 41 percent this month. Mangalore Refinery and Petrochemicals (MRPL) is up 21 percent year to date and 25 percent this month and in Q4 that is last quarter, Singapore GRMs hit USD 7.8 per barrel, which is the highest in four years. So, standalone refiners which do not have the marketing segment like Chennai Petro and MRPL tend to benefit most from high GRMs, which are gross refining margins.

International Energy Agency (IEA) expects the ongoing Russia-Ukraine war to reduce refining throughput by around 1.1 billion barrels of refining capacity per day and this will result in continued high refining margin till supply concerns abate. So it's not only Q4 that has done well. The expectation is that even Q1 (FY23) will be strong for these refiners and that's why these stocks have been buzzing in trade of late.