More Stories

Informist, Monday, Feb. 16, 2026

 

MUMBAI – The gross refining margins of Indian oil marketing companies are expected to moderate in the coming quarters, with a reduction in the share of Russian crude oil in their overall sourcing mix, according to CareEdge Ratings. The marketing margins of these companies, however, are expected to improve in the near term, assuming no change in retail fuel prices, CareEdge said in a report.

 

The strategic advantage from procuring discounted Russian crude, which at one point accounted for nearly 35-40% of India's crude oil import basket, is now expected to moderate significantly going forward, the report said. With discounts on Russian crude oil remaining narrow for much of the first half of 2025-26 (Apr-Mar), India diversified its crude oil imports slightly towards West Asian countries, particularly Saudi Arabia, Iraq, and the United Arab Emirates.

 

This shift is likely to accelerate further and become more pronounced following the finalisation of the interim India-US trade agreement earlier this month. Under the agreement, the US reduced tariffs on imports of Indian goods to 18% from an effective 50%, including penalties, in return for India's commitment to reduce imports of Russian crude oil.

 

"This geopolitical development carries significant strategic implications for Indian refiners. However, prevailing benign crude oil prices are expected to help Indian refiners navigate this shift easily, assuming there is no major disruption in global crude oil supplies," the report said.

 

A compelled shift away from Russian crude oil towards a blend of Venezuelan, US, and West Asian grades is likely to increase the weighted average cost of India's crude oil sourcing by $1.5-2 per barrel, directly compressing the gross refining margin premium that Indian refiners have enjoyed in recent years, it said. Gross refining margins fell to $4-6 per barrel in 2024-25 (Apr-Mar) from a high of $10-12 per barrel in FY24, and further bottomed out to $2-4 per barrel in the first quarter of FY26. This downturn was due to narrowing discounts on Russian crude oil, weaker product cracks, and heightened geopolitical uncertainties.

 

Thereafter, gross refining margins have rebounded significantly, to $8-10 per barrel in the September quarter and further to $9-13 per barrel in the December quarter, supported by agile inventory management, a fall in crude oil prices, healthy product cracks, and wider discounts on Russian crude oil due to US restriction on Russian oil trade, it said.

 

Even though gross refining margins are expected to moderate, the marketing margin – the markup earned on selling fuel at retail stations – will likely improve in the near term, supported by unchanged fuel retail prices and lower crude oil prices, CareEdge said. Marketing margins have remained slightly under pressure over the last two quarters due to stagnant pump prices, despite a sequential rise in international product prices, which led to a higher refinery gate transfer price.

 

"This compression highlights the vulnerability of the marketing segment to rising product cracks when retail prices are frozen. Despite moderation, MM (marketing margin) remained healthy compared with its historical average over the past few years. Also, OMCs (oil marketing companies) were shielded from the full impact of this compression by the government's timely release of the LPG subsidy from November 2025 onwards," it said.

 

The ratings agency expects crude oil prices to hover below $70 per barrel in the coming months. Brent crude, the global benchmark that plays a major role in defining gross refining margins and marketing margins, has traded significantly below its FY23–FY24 peaks, averaging around $62 per barrel in December, a 15% year-on-year decline.  End

 

US$1 = INR 90.65

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Reported by Ashutosh Pati

Edited by Saji George Titus

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

 

Informist Media Tel +91 (22) 6985-4000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2026. All rights reserved.