India’s three state-run oil marketing companies (OMCs) face a renewed squeeze on fuel marketing margins, LPG under-recoveries and working capital as crude prices remain above $100 a barrel, even after a sharp pullback on Friday.
Brent crude futures fell $3.28, or 3.05%, to $104.35 a barrel at 1309 GMT on Friday, while US West Texas Intermediate declined $3.41, or 3.33%, to $99.07. Both benchmarks touched their highest levels since mid-May earlier in the session, while Brent remained on course for a weekly gain of more than 8%.
For Indian refiners, the cost pressure is sharper. The Indian crude basket stood at $115.98 a barrel on September 9, while its September average rose to $104.09 a barrel through September 9, up 15.4% from $90.19 in August and sharply above $82.04 in July. The $104.09 figure is the latest September average supported by PPAC-linked published data.
Among the three OMCs, the impact could be sharpest on Hindustan Petroleum Corporation (HPCL), followed by Indian Oil Corporation (IOCL), while Bharat Petroleum Corporation (BPCL) is relatively better placed if crude remains elevated and retail fuel prices see restricted increases, according to Equirus Securities.
HPCL has a 51% refining-to-marketing ratio and 76% distillate yield, along with the lowest internal refining cover among the three. Greater dependence on purchased or imported products and higher leverage increase its vulnerability to sustained expensive crude.
IOCL’s 80% refining-to-marketing ratio and 80% distillate yield provide a stronger refining buffer. It, however, remains exposed to fuel marketing, LPG under-recoveries, inventory and working-capital requirements and expensive crude procurement, while petrochemical losses are an additional pressure point. BPCL, with a 74% refining-to-marketing ratio and 85% distillate yield, is comparatively better placed, supported by better integration, Bina refinery’s crude flexibility and a relatively stronger balance sheet.
“If crude remains above US$100 per barrel, with restricted retail-price increases, OMCs could face negative petrol and diesel marketing margins, higher LPG under-recoveries, higher crude-landing, freight and insurance costs, working-capital and debt accumulation, and inventory losses if crude subsequently corrects sharply,” said Maulik Patel, Head of Research, Equirus Securities.
The Indian basket has seen sharp swings this fiscal, averaging $114.48 in April, $106.23 in May, $83.22 in June, $82.04 in July and $90.19 in August. It comprises Brent Dated sweet crude and Oman-Dubai sour crude, in a 77.81:22.19 ratio for September.
The outlook suggests limited immediate relief. S&P Global Energy expects Middle East crude and condensate exports to average only 10-16 million barrels per day through 2027, against around 20 million b/d before the US-Iran war. Regional production is projected at 21 million b/d, 4.2 million b/d below its previous outlook.
S&P expects crude broadly in an $80-$100 a barrel range through 2027, with Dated Brent averaging around $90 or higher for the remainder of 2026 and $86 in 2027.
“The market is not returning to calm, it is adjusting to the new normal defined by unresolved conflict and persistent maritime risk,” said Jim Burkhard, Vice President and Global Head of Crude Oil Research at S&P Global Energy.
“For OMCs, Friday’s decline therefore offers limited relief as Brent remains above $100 and India’s crude acquisition cost stays elevated, leaving marketing margins vulnerable if high crude prices persist without corresponding retail fuel price adjustments,” said an analyst.