State-run oil marketing companies (OMCs) – IOC, BPCL and HPCL — are poised for a sharp sequential recovery in the September quarter, with combined profits of around Rs 15,000 crore compared with aggregate losses of Rs 18,150 crore in the previous quarter, analysts feel.
Their integrated margins are estimated at Rs 9-14 a litre in Q2FY27 against just 1-3 a litre in Q1, as auto-fuel marketing improved and LPG under-recoveries fell sharply, according to Emkay Research.
The recovery, however, remains vulnerable to renewed crude volatility and the Middle East conflict. Emkay said current integrated margins have already moderated to around ₹5-9 a litre, although Q2 averages remain substantially above the June quarter. HPCL is likely to see the strongest positive sequential change.
The earnings improvement could be substantial. ICICI Securities estimates the three firms will report a combined profit of ₹14,470 crore in July-September, against a combined loss of ₹18,150 crore in April-June, assuming current trends continue through the rest of September.
“Given the trends seen in the quarter so far, although recent weeks have seen a sharp decline in integrated margins, Q2 averages are still sharply higher than Q1 levels,” ICICI Securities said. It expects the three OMCs to remain profitable at both operating and net-profit levels even if current conditions persist.
IOCL is estimated to swing to a ₹7,303-crore profit from a ₹2,661-crore loss in Q1. BPCL could post ₹4,520 crore against a loss of ₹3,962 crore, while HPCL is expected to report ₹2,647 crore profit after a ₹11,526-crore loss.
The biggest turnaround is in fuel marketing. ICICI estimates Q2 marketing margins at ₹2.9 a litre on petrol and ₹1.3 on diesel, against negative ₹6.1 and ₹18.9 a litre, respectively, in Q1.
LPG is providing another major cushion. Emkay expects under-recoveries to fall to around ₹290 per cylinder in Q2 from ₹510 in Q1, helped by a 19% quarter-on-quarter decline in Saudi contract prices, lower spot premiums and the full impact of price hikes. Monthly under-recoveries are estimated at ₹490 in July, ₹180 in August and ₹200 in September.
Refining margins remain supportive but have moderated for some companies. ICICI expects IOCL’s refining margin at $15 a barrel versus $15.6 in Q1, BPCL at $18 versus $41.4, and HPCL at $16 versus $23.8. Emkay said refining cracks remain elevated amid refinery outages in Russia and the Middle East, with diesel particularly strong as product availability tightens. About 40% of Russian refining capacity is offline, it said.
The risk is that another crude spike reverses some of these gains. Emkay said Q1 had been hit by higher crude prices, freight and premiums, which also increased working-capital needs.
“While 2Q earnings should be better than 1Q, the continued escalation in the ME leaves the earnings trajectory below our initial expectations and poses downside risk to our full-year earnings estimates,” Emkay said.