CHENNAI: India’s state-run oil marketing companies are expected to withstand the impact of fresh US sanctions on Russian energy giants Rosneft and Lukoil, as well as the European Union’s ban on refined products derived from Russian crude, according to Fitch Ratings.
The rating agency said the measures are unlikely to materially affect refining margins or the credit profiles of rated Indian OMCs, though the eventual impact will hinge on the duration and strictness of sanctions enforcement.
Russia supplied about 33% of India’s crude imports between January and August 2025, and its discounted price has supported Indian OMCs’ EBITDA and profitability. While OMCs are expected to adhere to the sanctions—consistent with their public positions—Fitch noted that some refiners may still process Russian crude sourced through non-sanctioned channels.
Sanctions are likely to reduce global demand for refined products linked to affected Russian crude, widening product spreads. This could ease pressure on refiners’ profitability as they shift toward costlier alternatives and manage volatility in shipping and insurance. Refiners continuing to use Russian crude could also secure larger discounts, offering some margin protection.
Fitch added that ample spare global crude production capacity should help contain upward pressure on oil prices. It forecasts Brent crude at $65 per barrel in 2026, compared with $70 in 2025.
However, private refiners with sizable EU export exposure may face higher compliance risks, as verifying crude origin becomes more complex when grades are blended before refining. Such refiners may need to diversify markets, adjust crude sourcing strategies, or strengthen traceability systems.
Indian OMCs posted EBITDA broadly in line with or slightly above expectations in the first half of FY26, supported by lower crude costs and strong gasoil spreads. Gross refining margins averaged $6–7 per barrel, compared with $4.5–7 per barrel in FY25.
Fitch expects mid-cycle refining margins of around $6 per barrel in FY27, helped by rising domestic demand, high refinery utilisation and lower crude prices, even as global growth moderates. Marketing margins should remain stable barring any government intervention on retail prices or excise duties.
To cushion OMCs from regulated LPG sales at subsidised rates, the government has approved a Rs300 billion support package for Indian Oil Corporation (IOC), Hindustan Petroleum Corporation (HPCL) and Bharat Petroleum Corporation (BPCL) in the second quarter of FY26. This will help offset under-recoveries and strengthen liquidity, it said.
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