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OMC Fuel Losses Ease as Oil Price Shock Risks Rise
Indian oil companies had a better quarter because the cost of crude oil eased and fuel prices had been raised.
Their petrol business moved from a loss to a small margin, while diesel losses became smaller.
They also lost less money on cooking gas, and aircraft fuel margins improved.
But the improvement may not last.
The US Energy Information Administration expects oil to average $105 a barrel in the last quarter of 2026.
It says shrinking oil stockpiles and possible disruptions to shipments could push prices up.
The conflict involving Iran has also made diesel supplies tight and raised risks to ships carrying fuel.
The agency expects prices to average $84 a barrel next year.
State-run Indian oil marketing companies reported narrower fuel marketing losses in Q2FY27, with petrol margins turning positive.
Petrol margins improved to Rs 2.9 per litre from a loss of Rs 12 per litre; diesel losses narrowed to Rs 16.7 from Rs 32.
LPG under-recoveries fell to about Rs 290 per cylinder, and aviation turbine fuel margins improved after regular price hikes from July.
The US Energy Information Administration raised its Brent forecast to $105 per barrel for Q4 2026, citing falling inventories and risks to oil flows.
The ongoing Iran conflict has kept diesel supplies tight and contributed to attacks on tankers around the Strait of Hormuz.
- Who
- State-run Indian oil marketing companies, with oil-market forecasts from the US Energy Information Administration.
- What
- Fuel marketing losses narrowed in Q2FY27, while forecasts point to elevated oil prices and possible further volatility.
- Where
- India's fuel market and global oil routes, including the Strait of Hormuz and Saudi Arabia's East-West Pipeline.
- When
- Q2FY27; the EIA forecast Brent at $105 per barrel in Q4 2026 and $84 per barrel next year.
- Why
- Retail price increases and lower crude prices helped OMC margins, while falling global inventories and conflict-related supply disruptions threaten renewed price pressure.
Reasons for relief
Risks of renewed pressure
OMC margins
Reasons for relief
Lower crude prices and the full impact of retail fuel price hikes helped narrow losses and improve margins in Q2FY27.
Risks of renewed pressure
The relief could be short-lived if higher crude prices and supply disruptions reverse the improvement.
Oil price outlook
Reasons for relief
The EIA expects Brent to average $84 per barrel next year as regional production and exports generally increase through the forecast period.
Risks of renewed pressure
For Q4 2026, the EIA raised its Brent forecast to $105 per barrel amid falling inventories and risks to physical oil flows.
Conflict and supply
Reasons for relief
The EIA expects convoys through the Strait of Hormuz and export workarounds, including bypass routes and ship-to-ship transfers, to support rising regional exports.
Risks of renewed pressure
Tankers have faced attacks around the Strait of Hormuz, and the conflict has kept diesel markets tight.
Key facts
- Petrol marketing margin
- Rs 2.9 per litre in Q2FY27, compared with a loss of Rs 12 per litre in the previous quarter; excludes windfall levy impact.
- Diesel marketing loss
- Rs 16.7 per litre, down from Rs 32 per litre in the previous quarter.
- LPG under-recovery
- About Rs 290 per cylinder.
- Brent forecast, Q4 2026
- $105 per barrel, $14 above the EIA's estimate from the previous month.
- Brent forecast, next year
- The EIA expects an average of $84 per barrel.
- Brent average in Q2
- About $97 per barrel, according to Emkay Research.
- Reported tanker attacks
- At least 12 attacks on oil, LNG and LPG tankers around the Strait of Hormuz from September 25 to October 5.
Quotes
US Energy Information Administration
US government agency that publishes energy forecasts
“Although we assume that oil flows from the Middle East will remain constrained through the fourth quarter of 2026, we estimate that regional shut-in production in September was the lowest since the onset of hostilities”
financialexpress.com
Abbas Araghchi
Iranian foreign minister
“If our enemies again choose the path of military confrontation, our response will be stronger than before, and we will defend ourselves with even more force. There is no military solution, nor any solution based on new sanction…only negotiations based on justice and fairness could end the conflict”
financialexpress.com
Emkay Research
Research firm whose report discusses OMC margins
“Benchmark Gross Refining Margins softened quarter on quarter to $18.0/bbl from $24.7/bbl — though petrol and diesel cracks remained elevated amid supply disruption…ATF margins also improved, following the regular price hikes from July 2026, while LPG under-recoveries also narrowed, to approximately Rs290/cyl”
financialexpress.com
Sources
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