23 - 09 - 2026

Elevated crude prices weaken OMC’s marketing margins: ICRA

The marketing margins of Oil Marketing Companies (OMCs) are estimated at negative ₹8 per litre on petrol and negative ₹9 per litre on diesel, while domestic LPG under-recoveries stood at around ₹300 per cylinder in September 2026, according to a report by rating agency ICRA.

The loss follows from the recent spike in crude oil prices amidst domestic retail prices of downstream fuels remaining unchanged. At these levels, the daily loss to the OMCs is estimated at ₹530 crore.

“The escalation of the West Asian conflict and disruptions to key oil supply routes have led to a spike in crude prices in recent weeks, resulting in sizeable marketing losses and LPG under-recoveries for oil marketing companies (OMCs),” ICRA said.

Prashant Vasisht, Senior Vice-President and Co-Group Head, Corporate Sector Ratings, ICRA added that elevated crude prices and unchanged domestic fuel prices would put pressure on profitability and cash flows of OMCs, while also elevating their short-term borrowings for increased working capital requirements.

Crude oil prices have increased sharply in recent weeks amid escalating geopolitical tensions and supply disruptions in West Asia, driven by renewed US-Iran conflict, the shutdown of Saudi Arabia’s East-West pipeline, and heightened Houthi activities in the Red Sea.

The Indian crude basket rose to $117.4/barrel (bbl) as on September 21, 2026, from the 2025-26 average of around $66/bbl.

The impact on OMCs’ earnings in 2026-27 will depend on crude prices, product cracks, retail price revisions, and government support for LPG under-recoveries.

The cumulative negative LPG buffer increased sharply to ₹61,940 crore as on June 30, 2026, as the rise in international LPG prices following West Asian supply disruptions was not fully passed on to consumers. The estimated loss per domestic cylinder stood at ₹500 in Q1 FY27 and remained at around ₹300 in September 2026.

LPG under-recoveries are likely to rise further if elevated international prices persist without a commensurate increase in domestic selling prices or additional Government compensation.

Singapore gross refining margins (GRM) have remained above $10/bbl since the start of the West Asia crisis, supported by refinery and product supply disruptions, inventory drawdowns, and outages across West Asian refining capacity. Additional supply shortages arising from damage to Russian refineries further tightened product markets, supporting elevated refining margins.

As product prices increased, export levies in the form of the Special Additional Excise Duty (SAED) on diesel and aviation turbine fuel (ATF) were introduced from March 27, 2026, and subsequently extended to petrol.

For domestic supplies, SAED is adjusted in the refinery transfer price, reducing the effective product cost for marketing divisions of OMCs. The SAED on these fuels has remained high at ₹20/litre on diesel and ₹15/litre on ATF since September 16, 2026, reflecting the strong cracks for these fuels.