Oil prices crash after Organization of the Petroleum Exporting Countries (OPEC) fails to strike a deal with its allies on production cuts. Russia refuses to agree to a Saudi-led plan and in response, Saudi Arabia slashes prices and prepares to increase production.

MK Surana, chairman and MD of Hindustan Petroleum Corporation Ltd (HPCL) is of the view that this particular crash in crude prices is governed by the factors which are different than the ones we normally see. "It is abnormal, it is quite sharp and it is not guided by purely the demand side of the product also," he said.

"So, in the near-term, we should see softness in most of the Middle-East crude to follow and may see better margins on the refining side. Lower crude price is good for the refiners. We should see better margins in the near future,” he said in an interview with CNBC-TV18.

“We had the lower gross refining margins (GRMs) and the cracks in the recent past but this particular event, which we are seeing now where the Saudi crude has reduced by almost USD 6 per barrel – that should improve the cracks in the near future,” he added.

Speaking about the divestment of Bharat Petroleum Corporation Ltd (BPCL), Surana said, “It depends on how the divestment proceeds take place but assuming that there are private players, we may see certain change in the way the businesses are picked up.”

“Sudden fall in the crude price does cause the inventory losses but we still have got 24 more days in the month of March. So, when you see sudden fall in the crude prices, the pick up is also sharper if at all it happens at one part of it. so we may see the days of gain also in March. So it will ultimately pay out, the net of it. However, as far as margins are concerned, we expect better margins in the nearer month now,” he further mentioned.

On demand, he stated, “As far as February was concerned, it was better than the earlier months. Year-on-year (YoY) you should see growth in the month of February in diesel and in petrol. Diesel growth in the month of February was better than January and December. We expect around 5 percent in diesel in the month of February. There was one additional day in that month but even after discounting that day, we are better than earlier months. The petrol growth have been better earlier as well. So, we could see 2-2.5 percent more growth in February YoY.”

When asked where the demand was coming from, he said it was not possible to identify one particular factor because there were too many factors at play. “Impact of coronavirus to India as far as the last month was concerned was not to the extent it was felt elsewhere. It is only now that the concerns are being raised or the cautions are being raised,” he said.