The oil and gas sector is in focus. On the one hand, the upstream oil companies like ONGC and Oil India are surging over 4% each but OMCs are deep in the red. Rising crude oil prices continue to be a key worry but what exacerbates the concerns are PM Modi’s call for using more electric modes of transport and cutting down fuel usage.
Royalty cut for upstream oil companies
One of the big developments that is in focus is the Government’s move to rationalise royalty rates under the Oilfields (Regulation and Development) Act, especially in the light of rising crude oil prices.
Highlighting the need to remove long-standing inconsistencies across regimes and to ensure a stable framework for India’s upstream sector, the Minister for Petroleum and Natural Gas Hardeep Singh Puri took to social network platform X to announce the changes.
He said, “in a big boost for the country’s upstream sector, rationalisation of royalty under the ORD Act marks a new era for our Oil & Gas regimes by eliminating inconsistencies and driving growth in the upstream sector. This landmark decision will be a major step toward regulatory clarity,”
This decision followed the 2025 amendments to the ORD Act and Petroleum and Natural Gas Rules, which established new methodologies for royalty on crude oil, natural gas, and casing head condensate.
“The revised Schedule removes long-standing inconsistencies across regimes to ensure a stable, predictable, and investor-aligned framework for India’s upstream sector,” Puri said.
Oil marketing companies under pressure
However, the situation is quite different on the other side of the spectrum in the oil and gas space. The Oil Marketing Companies are facing increasing pressure because fuel prices have largely remained unchanged despite the crude rally. Crude prices have in fact rallied nearly 55% since the beginning of the Iran-US war.
According to Petroleum Minister Hardeep Singh Puri, OMCs are currently witnessing significant under-recoveries.
He said in a tweet, “Even after this decision, estimated OMC under-recoveries during this quarter itself are expected to surge to Rs 2,00,000 crore and losses are expected to be around ₹1,00,000 crore.”
The government has also stated that India currently holds around 60 days of crude oil reserves, 60 days of natural gas and 45 days of LPG rolling stock.
Government focuses on fuel conservation
Prime Minister Narendra Modi has already appealed to citizens to reduce unnecessary fuel consumption amid the ongoing West Asia uncertainty.
The government, through the OM’s advisory, is nudging citizens to use public transport, work-from-home arrangements and controlled fuel usage to help reduce pressure on foreign exchange reserves and also cut down fuel consumption.
Why higher crude hurts India
India remains highly dependent on imported crude oil. Because of this, a sustained rise in oil prices directly impacts the country’s import bill and foreign exchange outflows.
Higher crude prices usually weaken the rupee and increase inflationary pressure across sectors.
The relationship between crude oil and the stock market often works like a see-saw. When oil prices rise sharply, sectors dependent on crude-based raw materials generally face pressure on profitability.
Airlines, paints and tyre companies face cost pressure
Airline companies are among the most sensitive to crude price movements because aviation turbine fuel forms a major portion of operating costs.
Similarly, paint companies use crude derivatives such as naphtha and other petrochemical inputs in manufacturing. Rising crude prices increase raw material expenses and can impact margins if demand remains weak.
Tyre manufacturers and logistics companies also face pressure because diesel, synthetic rubber and carbon black prices move closely with oil.
Stocks and sectors in focus
Crude-sensitive sectors are seeing increased attention amid the latest oil rally.
Stocks linked directly or indirectly to crude oil prices are likely to remain volatile if tension in West Asia continues.
Among upstream and domestic energy-linked companies, stocks such as Hindustan Oil Exploration Company and Deep Industries are in focus.
Airline companies including InterGlobe Aviation and Spicejet will also be in focus because aviation turbine fuel costs rise sharply when crude oil prices increase.
Paint companies such as Asian Paints, Berger Paints (India) and Kansai Nerolac Paints are under radar as crude derivatives form a major part of their raw material costs.
Tyre makers including MRF, Apollo Tyres and CEAT will also be tracked because synthetic rubber and carbon black are crude-linked inputs.
Logistics companies like Delhivery may also face pressure due to higher diesel costs.
Meanwhile, Oil Marketing Companies (OMCs) such as Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation remain in focus because retail fuel prices have not risen in line with crude oil prices.
Fragile US-Iran ceasefire keeps markets nervous
Global crude oil prices moved higher after new comments from United States President Donald Trump raised doubts over the durability of the Iran ceasefire.
Brent crude traded above $104 per barrel, while West Texas Intermediate crude hovered near $98 per barrel during Tuesday trade.
Trump reportedly described the ceasefire as being on “massive life support” and also criticised Iran’s response to the latest peace proposal.
The latest developments have increased concerns that tension in West Asia could escalate again, keeping oil supply risks elevated.
Strait of Hormuz concerns return
The Strait of Hormuz remains one of the biggest concerns for global energy markets.
The route handles nearly one-fifth of global oil trade.
Recent flare-ups in the region and threats around shipping routes have again pushed traders toward risk-off positioning in global markets.
What it means for investors
The latest crude oil rally is again shifting market attention toward sectors most vulnerable to rising energy costs. For the Indian investors, it is also important to understand what it means for the ex-chequer and how it impacts day today fuel prices and the impact on inflation as a whole.
Investors are also likely to closely monitor developments around the US-Iran ceasefire, the Strait of Hormuz situation, fuel pricing policies and global crude inventory trends in the coming weeks.