The ongoing tension across West Asia has pushed oil and gas into everyday conversation. From rising fuel prices to concerns around supply disruptions, the situation is now directly linked to how markets may move next. With crude scaling past 4-year highs, the big question is how will it impact oil and gas companies in India.
The global brokerage Nomura has shared its latest view on India’s oil and gas sector. Let’s take a look at what is the brokerage say on this and the rationale behind it –
Refining margins surge amid global disruption
Nomura stated that one of the biggest changes seen recently is the sharp rise in refining margins. This comes as global supply chains face disruptions due to the conflict.
The report noted, “Since the war in Iran started, the profit from making diesel and jet fuel has increased sharply. It is now around $76 and $107 per barrel, compared to the usual $15–20 earlier.”
This spike has been driven by multiple factors. This includes refinery disruptions, supply blockages in the Strait of Hormuz, and higher demand linked to military and logistics activity.
Furthermore, the brokerage house added that this kind of environment creates a strong opportunity for companies that are more exposed to refining rather than retail fuel sales.
Reliance emerges as key beneficiary
Reliance Industries stands out as Nomura’s top pick.
The brokerage highlighted that, “Refining the best way to play the Middle East crisis; Reliance our top pick.”
As per the report, Reliance has a strong refining business but limited exposure to fuel retailing. This helps it benefit from higher refining margins without facing major losses from selling fuel at controlled prices.
It added, “We estimate a approx. 2.3% increase in consolidated EBITDA for Reliance for every $1/bbl increase in refinery margins.”
What about oil marketing companies?
Though oil refiners may benefit from high crude, the challenges are different for oil marketing companies (OMCs).
As per Nomura, these companies may face pressure because they sell petrol and diesel in the domestic market. This is where prices may not fully reflect global increases.
The report noted that losses from fuel retailing could outweigh gains from refining.
GAIL seen as stable pick among gas stocks
In the gas segment, Nomura prefers GAIL India. The brokerage prefers GAIL because its business earns fixed charges, so its profits are less affected by changes in gas prices. It also expects a 12% increase in tariffs from January 2026, which will support earnings.
This means GAIL earns revenue based on fixed tariffs rather than volatile market prices, making its earnings relatively stable.
The brokerage also expects some volume impact but believes it will be balanced by domestic gas supply.
It added, “We expect 20% transmission volume impact on GAIL as lower imported LNG volume will likely be cushioned by a meaningful share of domestic gas volumes, which remain unaffected.”
Pressure points for LNG players
For companies like Petronet LNG, the outlook is more cautious.
As per the brokerage report, supply disruptions from global partners could impact volumes.
The report also added that Petronet LNG may see a big drop in volumes, up to around 40%, due to supply issues from Qatar. However, its profit margins may remain stable because tariffs are expected to increase by 5% every year from January 2026.
Government action may come into play
Another key factor to watch is government policy.
According to the brokerage report, if crude prices stay above $100 per barrel, there could be a return of windfall taxes on domestic producers.
It said, “We think that if crude prices remain above $100/bbl by the end of March, there is a strong case to bring back SAED (Special Additional Excise Duty) also called the windfall tax on domestic oil producers like ONGC, Oil India.” Nomura has a ‘Neutral’ rating on both these stocks.
Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a SEBI-registered financial advisor.