New Delhi, Aug. 3: Indian Oil today reported a 45 per cent decline in net profit at Rs 4,548.41 crore for the April-June quarter of the current financial year as a drop in global oil prices led to inventory losses.

The country's largest oil company had reported a net profit of Rs 8,268.98 crore in the year-ago period.

"Variation in net profit is primarily due to inventory losses," IOC chairman Sanjiv Singh told reporters here.

According to Singh, Indian Oil lost Rs 4,042 crore during the reporting quarter due to inventory losses on account of lower international oil prices.

Inventory loss occurs when oil prices fall after procurement and before marketing.

For example, if crude oil is purchased at say $50 per barrel price, an inventory loss will arise if by the time it is refined and marketed the price falls to less than that.

The loss would be booked as the market rates of products are fixed based on the current global crude oil price.

An inventory gain would be booked if the reverse happens - product prices rise after procurement and before marketing.

IOC earned $4.32 on turning every barrel of crude oil into fuel in the quarter compared with a gross refining margin (GRM) of $9.98 a barrel in the year-ago period, Singh said.

The company suffered an inventory loss of Rs 2,033 crore on crude oil in the first quarter compared with an inventory gain of Rs 3,785 crore in the same period a year ago, A.K. Sharma, director (finance), said.

On products, there was an inventory loss of Rs 2,009 crore compared with a gain of Rs 3,695 crore last year.

But for the inventory loss, GRM would have been $6.44 per barrel in the first quarter. This would have compared with $3.56 a barrel of GRM without accounting for the inventory gain in the same period of the previous year.

The slump in profit would have been larger but for the Rs 2,808.05 crore write-back after the settlement of liability for entry tax in Haryana.

Singh said IOC sold 20.736 million tonnes of fuel in the domestic market and 1.772 million tonnes abroad during the first quarter of 2017-18. This is against 20.415 million tonnes domestic sales and 0.963 million tonnes of exports in the same period of 2016-17.