Elevated refining margins may help OMCs recover ₹35,000 cr fuel marketing losses within a quarter: Report

According to a report by Antique Stock Broking, integrated refining and marketing margins have sharply recovered, and India's oil marketing companies (OMCs) could recover an estimated ₹35,000 crore in fuel marketing losses incurred during the March–June 2026 crude oil price spike within the next one to two quarters.

The losses were incurred after global crude prices surged during the Strait of Hormuz crisis while domestic retail prices of petrol and diesel remained largely unchanged, forcing OMCs to absorb the higher cost of auto fuels. According to the brokerage, the sharp improvement in refining economics has significantly strengthened the sector's near-term earnings outlook.

A major factor contributing to the enhanced margin environment is the high diesel crack spreads, which represent the additional revenue refiners generate by converting crude oil into diesel. Diesel crack spreads have consistently been over $50 per barrel, contrasting with historical averages of below $20 per barrel. The report points to several reasons for the robust diesel margins, including disruptions in Russian refineries, Ukrainian drone strikes, tighter product stockpiles, and a lack of new refinery capacity additions—all of which have kept global diesel supplies limited despite the decline in crude oil prices.

Reflecting the improvement in refining profitability, spot integrated refining and marketing margins have increased to ₹27.7 per litre, rising from ₹10.6 per litre during the crisis phase and compared to a three-year average of ₹16.4 per litre. Presently, margins are ₹11.3 per litre higher than the historical average, which the brokerage predicts is adequate to cover the entire fuel marketing loss within a quarter if current conditions persist.

Antique forecasts that Brent crude prices will drop below $70 per barrel in the next three to five months, pointing to an increase in global oil supply, which includes greater production from OPEC and weaker crude imports from China.

As per the report, the combination of lower crude prices and elevated diesel crack spreads creates a favourable operating environment for integrated OMCs, including Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL). Anticipated robust refining profits are likely to counterbalance the losses faced during the crude price surge and help restore quarterly profitability.