India Oil & Gas: Soft Crude, Strong Refining – Prefer Downstream over Upstream

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India Oil & Gas: Soft Crude, Strong Refining – Prefer Downstream over Upstream

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13 Jul 2026 12:22:11 ET │ 19 pages

India Oil & Gas

Soft Crude, Strong Refining – Prefer Downstream over Upstream

CITI'S TAKE

Saurabh Handa AC

Citi’s global commodities team highlights that recent disruptions across the +91-22-6175-9858

Middle East, China, and Russia have tightened global product balances saurabh.handa@citi.com

despite relatively resilient crude supply, supporting elevated refining cracks.

This dynamic of soft crude prices but high refining cracks augurs well for the Prerna Goenka

OMCs’ integrated margins (IOCL>BPCL>HPCL), assuming status quo on prerna.goenka@citi.com

excise duties, export taxes, and retail fuel prices. Separately, ONGC too has

been called upon for national service following directions from the gov’t to

develop an SPR facility. We prefer downstream OMCs over upstream SOEs.

Outages & disruptions driving refining margins — A series of disruptions across the

Middle East, China, and Russia has seen global primary refining outages rise to

~5m-b/d in recent months, an increase of over 1.5m-b/d yoy, which has materially

tightened product balances despite relatively resilient crude supply hitting the

market, thus keeping refining cracks elevated (see: Oil Monitor; July 10). While

throughput of Persian Gulf refiners has recently improved to 8.5m-b/d, it still

remains below 10.4m-b/d in Feb’26, as damaged facilities are likely to require a

longer recovery period, leaving a significant share of lost capacity still offline. China’s

refinery runs have fallen by >3m-b/d since the outbreak of the conflict, with state-

owned refiners reducing throughput by ~2m-b/d, while independent refiners

account for a further >1m-b/d of cuts.