Brent crude oil prices were hovering above $ 105 per barrel on Monday with US President raising the prospects of further strikes on Iran.
India imports nearly 85%-90% of its total annual oil requirements from key producing countries, like Russia, Saudi Arabia, Kuwait and USA, amongst others.
On the one hand, rising international oil prices has led to rising under-recoveries for oil marketing companies (OMCs) for every litre of petrol and diesel sold along with every domestic gas cylinder supplied to homes.
However, it has created avenues for super-normal refining profits for large refiners, like pure-play PSU refiners.
The $20.5 Surge: Why Singapore Margins Are Breaking Records
Rising prices of oil products has created opportunities for Indian refiners amidst global refinery and product supply disruptions, inventory draw downs and outages across west Asian refining capacity.
This is also reflected in surging gross refining margins (GRMs) for refiners, with the key regional benchmark, Singapore GRMs averaging nearly $ 20.5 per barrel right up to late in September 2026 quarter, according to brokerage house reports and international media.
A year earlier, Singapore GRMs were pegged at $ 8.5 per barrel.
ICRA in its report dated 23 September, 2026 points out that Singapore gross refining margins (GRM) have remained above $10 per barrel since the start of the West Asia crisis, supported by refinery and product supply disruptions, inventory draw downs and outages across west Asian refining capacity.
Additional supply shortages arising from damage to Russian refineries further tightened product markets, supporting elevated refining margins, the report highlighted.
A similar view was highlighted by the global energy body, IEA in its report of 11 September, 2026. IEA highlights refinery throughputs reached a summer peak of 81.4 million barrels per day in August, however, 4.2 million barrels per day lower than a year ago, with losses spread across the Middle East, Russia and crude importing economies in Asia.
Global runs are forecast to decline by 2.6 million barrels per day to 81.5 million barrels per day in 2026. Refining margins reached record levels in the Atlantic Basin in August, led by sharply higher diesel cracks.
Capacity Breakdown: The State Refiners Bypassing the Middle East Squeeze
Key PSU refiners in the country include Indian Oil Corporation with highest-ever crude throughput of 75.45 million tonnes during FY26, with 107.4% capacity utilization.
Bharat Petroleum Corporation (BPCL) had a refining capacity of nearly 35.3 million tonnes during FY26 while Hindustan Petroleum Corporation (HPCL) has nearly 24.5 million tonnes during FY26.
Pure play refiners like Mangalore Refinery and Petrochemicals Limited (MRPL) has a capacity of nearly 15 million tonnes during FY26 while Chennai Petroleum Corporation (CPCL) has a refining capacity of 235,000 barrels per day or nearly 10.5 million tonnes.
PSU refining capacity / throughput during FY26
| Refiner | Capacity (Million tonnes) |
| Indian Oil Corporation | 75.45 |
| Bharat Petroleum Corporation Ltd | 35.3 |
| Hindustan Petroleum Corporation Ltd | 24.5 |
| Mangalore Refinery and Petrochemicals | 15 |
| Chennai Petroleum Corporation | 10.5 |
Source – Annual report of companies
Pure play refiners are expected to be the biggest winners from the current surge in Singapore GRMs in the second quarter of FY27 and that’s because they are not selling retail fuel (view below) at a loss.
The Export Levy Hurdle (SAED)
Amidst a global shortage of fuel products like petrol and diesel, and to ensure adequate domestic supply, the government-imposed export levies in the form of the Special Additional Excise Duty (SAED) on diesel and aviation turbine fuel (ATF) from March 27, 2026. Subsequently these export levies were extended to petrol.
The SAED on these fuels has remained high at Rs 20 per litre on diesel and Rs 15 per litre on aviation turbine fuel (ATF) since September 16, 2026. This export levy via SAED is expected to ‘dent’ the super-normal profits of refiners as they would be able to fully leverage the surge in Singapore GRMs seen in the second quarter of FY27 via enhanced sales of fuel products overseas.
The Retail Trap: Why OMCs Are Bleeding ₹530 Crore Daily
No doubt, OMCs would benefit from strong refining margins in the September 2026 quarter, thanks to surging Singapore GRMs.
However, the OMCs which retail fuel at pumps, face under-recoveries for retail sales of fuel. Rating agency ICRA estimated the marketing margins are at negative Rs 8 per litre on petrol and negative Rs 9 per litre on diesel, and the domestic LPG under-recoveries at around Rs 300 per cylinder in September 2026. Pure play refiners do not face such under recoveries.
Under-recoveries of oil marketing companies
| Petroleum product | Under-recovery per unit sold (in Rs) |
| Petrol | Rs 8 per litre |
| Diesel | Rs 9 per litre |
| Domestic LPG | Rs 300 per cylinder |
Source – ICRA report
This follows from the recent spike in crude oil prices amidst domestic retail prices of the downstream fuels remaining unchanged. ICRA estimates that OMCs are losing Rs 530 crore each day.
ICRA also highlights the Indian crude basket rose to $117.4 per barrel as on September 21, 2026 from the FY26 average of around $66/bbl.
Q1 FY27 Reality Check: Pure-Plays vs. OMCs
Under-recoveries related to petrol, diesel and domestic LPG sales pushed OMCs deep into the ‘red’ in the first quarter of FY27.
Divergence in performance between pure-play PSU refiners and OMCs
| Company | Net Sales (in Rs crore) | Net Profit / Net loss (in Rs crore) |
| Indian Oil Corporation | 2,81,933 | Net loss of Rs 1,141.1 crore |
| Bharat Petroleum Corporation Ltd | 1,59,527 | Net loss of Rs 1,872 crore |
| Hindustan Petroleum Corporation Ltd | 1,45,225 | Net loss of Rs 12,264.7 crore |
Mangalore Refinery and Petrochemicals Ltd | 41,608.96 | Net profit of Rs 945.68 |
| Chennai Petroleum Corporation Ltd | 29,358.75 | Net profit of Rs 1,031.35 crore |
Source – Screener.in and company quarterly results
In contrast, pure-refiners benefited from higher Singapore GRMs in the first quarter of FY27 and reported an improved net profit.
Stock prices – are investors bullish on pure refiners?
Pure refiners like Chennai Petroleum Corporation Ltd ended 2.6% higher at Rs 1,411 on Monday, despite the broad sell-off witnessed on the Dalal Street. The stock is not too far from its 52-week high of Rs 1,677 that was reached on 11 September 2026.
Also Mangalore Refinery and Petrochemicals Ltd ended 3% higher at Rs 169.8 on Monday, and it had reached a 52-week high of Rs 215 on 9 March, 2026.
In contrast, oil marketing companies like IOCL ended 1.9% lower at Rs 133.2, and it is hovering above its 52-week low of Rs 130.3 that was reached on 2 April, 2026.
BPCL ended 1.8% lower at Rs 302, and it is hovering above its 52-week low of Rs 266.55 that was reached on 2 April, 2026.
And HPCL ended 2.65% lower at Rs 342.2 and it is hovering above its 52-week low of Rs 316.2 that was reached on 23 March, 2026.
Valuation Disconnect: Are MRPL and CPCL Still Relatively Cheap?
Mangalore Refinery and Petrochemicals Ltd trades at a consolidated P/E of 10.8, according to Screener.in. Over the past 5 years, it has traded at a P/E between 2.1 times and 62.3 times.
Chennai Petroleum Corporation Ltd trades at a consolidated P/E of 5, and over the past 5 years, it has traded at a P/E between 1.1 times and 25.3 times.
Pure refiners – are they still an attractive buy?
| Oil Company | Consolidated P/E |
| Mangalore Refinery and Petrochemicals Ltd | 10.8 times |
| Chennai Petroleum Corporation Ltd | 5.0 times |
| Indian Oil Corporation | 5.6 times |
| Bharat Petroleum Corporation Ltd | 8.5 times |
| Hindustan Petroleum Corporation Ltd | 43.5 times |
Source – Screener.in
OMCs like IOCL traded at a consolidated P/E of 5.6 times, BPCL at 8.5 times and HPCL at 43.5 times.
Two PSU pure play refiners, Managalore Refinery and Petrochemicals and Chennai Petroleum Corporation trade at attractive valuations, and they are expected to broadly benefit from the jump in Singapore GRMs witnessed.
Also, even if a solution is found to the Middle East crisis and the Russia-Ukraine war, it will take considerable time, perhaps even a few years, before refineries that have been damaged by bombing / war will return to a level of normal operations.
Readers could add Mangalore Refinery and Petrochemicals and Chennai Petroleum Corporation to their watch list of stocks for 2026, and see if their performance matches expectations.
Disclaimer
Amriteshwar Mathur is a financial journalist with over 20 years of experience.
The writer and his family have no shareholding in any of the stocks mentioned in the article.
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