The Middle East war continues to impact oil supply through the Strait of Hormuz, leading to a spike in crude prices. S&P Global Ratings, as quoted by PTI, could hurt the profit margins of oil marketing companies, such as IOC, BPCL and HPCL may will keep retail prices of petrol and diesel unchanged to curb inflationary pressures.
The PTI report noted that S&P Global Ratings has also revised its 2026 average Brent crude assumption by $5 to $65 per barrel amid the escalating Middle East conflict.
Oil prices have risen since the start of the US-Iran war, with crude rising to over $100 per barrel earlier this week as the Strait of Hormuz, which handles about a fifth of the global Crude oil and liquified natural gas (LNG) flows, remained effectively closed. However, on Wednesday, Crude prices have fallen to $88 a barrel.
IOC, BPCL, HPCL margins at risk: S&P
S&P report said that risks to upstream players such as ONGC will be reduced by higher sale prices and limited operating exposures to the Middle East.
However, downstream players, such as India’s oil marketing companies (OMCs), will face both market and regulatory headwinds by the Indian government.
“In India, LPG prices for consumers are regulated. Amid rising prices, OMCs such as Indian Oil Corp (IOC), Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp (HPCL) may need to maintain steady retail prices for petrol and diesel to curb inflationary pressures, in our view,” S&P said in its report according to PTI
“Their margins could suffer as a result. The government may use budgetary allocations and excise duty cuts to ease resulting pressures on the OMCs, as it has done during the Russia-Ukraine conflict, but the likelihood of such measures remains uncertain,” S&P added.
India continues crude diversification with Russia, Venezuela supplies
The US-based rating agency said India, which imports 55% of LPG and 30% of LNG through Strait of Hormuz, will remain dependent on maritime routes to fulfil its crude needs, but there is some scope for diversification as the country has a history of buying oil from outside Asia, such as from Russia and South America.
Purchases from Russia currently stand at 1.1 million bpd, while those from Venezuela resumed last month at 142,000 bpd, S&P added, as quoted by PTI.
Purchases from Russia may increase as the US, which had earlier imposed a 25% tariff on India over Russian crude imports, has granted a 30-day waiver allowing Indian refiners to buy certain Russian cargoes amid Middle East supply disruptions.
Conclusion
S&P said despite the high exposure, India has limited reserves. Its strategic petroleum reserves support 10 days of consumption while its commercial stocks support roughly 65 days.
LPG and LNG stockpiles are even lower, reportedly around 25-30 days and 10-12 days, respectively.
With the inputs from PTI