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Informist, Monday, Mar. 2, 2026

 

By Sunil Raghu and Ashutosh Pati

 

AHMEDABAD/MUMBAI – State-owned oil marketing companies Indian Oil Corp. Ltd., Bharat Petroleum Corp. Ltd., and Hindustan Petroleum Corp. Ltd. are expected to face near-term pressure on margins as crude oil prices rise amid escalating tensions between the US-led group and Iran. Analysts tracking the sector said a sustained increase in crude oil prices would compress marketing margins sharply if domestic fuel product prices remain unchanged.

 

May futures of Brent crude rose 9% to $79.43 per barrel on the Intercontinental Exchange, driven by supply concerns following the military attack by the US and Israel on Iran last week.

 

India imports nearly 87% of its crude oil requirement and consumes roughly 5 million barrels per day. Analysts said higher crude oil prices directly affect oil marketing companies' operating costs, working capital requirements, interest costs, and debt levels.

 

"Every $1 per barrel rise in crude compresses OMC marketing margins by about 0.5 rupee per litre if pump prices are not revised," said Ajay Kedia, director, Kedia Stocks & Commodities Research Pvt. Ltd. "If crude sustains above $80/bbl while retail prices remain frozen to contain inflation, earnings before interest, tax, depreciation, and amortisation from the marketing segment could weaken."

 

Devarsh Vakil, head of prime research, HDFC Securities Ltd., said, "Oil marketing companies are expected to face a negative outlook as rising crude oil prices are likely to compress their marketing margins. Similarly, every 50 paise per litre change in fuel margins could lead to a 7-10% impact on EBITDA."

 

IOC sells around 32 billion litres of petroleum products every quarter, BPCL about 16 billion litres, and HPCL about 13 billion litres every quarter. These three refiners sell a total of about 60 billion litres of petro products per quarter. A back of the envelope calculation suggests that a $1 per litre fall in margins translates to a roughly INR 30 billion fall in EBITDA.

 

Sumit Pokharna, vice president, research at Kotak Securities Ltd., added that persistent high crude prices could necessitate retail fuel price increases, although this may not be immediate.

 

Data from the Petroleum Planning and Analysis Cell of the Ministry of Petroleum and Natural Gas shows the price of the Indian crude basket has been firming for over a month. The average price rose from $63.08 per barrel in January to $69.01 per barrel in February, an increase of 9.4%. On Thursday, the price of the basket was $70.25 per barrel. It rose to $71.17 per barrel Friday.

 

The Indian basket comprises around 79% sour crude (high sulphur) and 21% sweet crude (low sulphur), and generally trades slightly below Brent benchmarks but above the US West Texas Intermediate. Analysts said sustained geopolitical tensions could further widen the gap between global crude prices and domestic pump prices, pressuring margins of oil marketing companies.

 

STRONG DECEMBER QUARTER PERFORMANCE

The three oil refiners reported strong profit growth in the December quarter, aided by lower global crude prices. IOC posted a 453% year-on-year growth in adjusted net profit, BPCL recorded a 62% growth, and HPCL reported a 35% growth. Brent crude averaged $63.6 per barrel in the December quarter, down $5.4 per barrel from the September quarter.

 

Gross refining margins were healthy in the December quarter: IOC's was $12.2 per barrel, BPCL $13.3 per barrel, and HPCL $8.9 per barrel, compared with the Singapore benchmark of $7.5 per barrel. The gross refining margin -- the difference between the cost of crude oil and the value of refined products -- is a key indicator of refinery profitability.

 

India maintains official crude reserves of 7–8 days, while oil marketing companies hold an additional 12–15 days of inventory. Analysts said this could help cushion near-term margin pressure and partially offset losses in the March quarter.

 

Prashant Vasisht, senior vice president and co-group head, corporate ratings at ICRA Ltd., cautioned that the ongoing conflict could heighten energy price volatility. "Indian refiners can source crude from alternative regions such as the US, Africa, and South America, but elevated prices would increase the import bill and moderate marketing profitability," he said.

 

While analysts and officials did not quantify the full impact on margins, sustained high crude prices are expected to pressure domestic fuel pricing and earnings. If the conflict continues beyond the four-week window suggested by US President Donald Trump, the closure of the Strait of Hormuz or disruptions among key West Asia producers, could push crude oil prices even higher.

 

On Monday, shares of IOC closed 4.5% lower at INR 179.11 on the National Stock Exchange, those of BPCL down nearly 3% at INR 374.80, and HPCL down 3.3% at INR 424.50.  End

 

US$1 = INR 91.47

 

Edited by Ashish Shirke

 

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