India Oil & Gas: OMCs and India’s ethanol blending dynamics

Research evidence excerpt

India Oil & Gas: OMCs and India’s ethanol blending dynamics

Global Markets Research

17 July 2026India Oil & Gas

EQUITY: OIL & GAS/ CHEMICALS ASIA

OMCs and India’s ethanol blending dynamics Research Analysts

India Oil & Gas/Chemicals

Ethanol blending is margin-positive for OMCs at crude oil Bineet Banka, CFA - NFASL

bineet.banka@nomura.comprice higher than USD80/bbl

+91(22)4037 4044

Ethanol blending not a meaningful earnings driver for OMCs

While ethanol blending is often considered as a structural positive for oil marketing

companies’ earnings, we see limited impact on profitability when oil prices are in a range-

bound trade. Our sensitivity analysis (see Fig.14) suggests OMCs would earn ~INR2-

4/litre of additional marketing margins if crude oil prices were to breach USD100/bbl at

mid-cycle gasoline cracks of USD15-20/bbl. On the contrary, if crude oil prices come

below USD70/bbl, ethanol blending would become a negative drag on OMCs’ profitability.

We believe the macro benefit of E20 is a lower gross crude import bill accrues to the

government and farmers. Ethanol blending, in our view, is therefore an energy security

and agri policy initiative riding on OMCs’ vast distribution network.

We continue to like OMCs as we believe the oil market could rapidly return to a bearish

zone once the West Asia conflict sees signs of cooling off (supported by IEA’s significant

oil surplus forecast for 2027, Fig.2). In our view, OMCs are the most appropriate way to

play any oil price decline, given the strong earnings sensitivity to changes in oil price. We

continue to prefer IOC (IOCL IN, Buy) among OMCs which has high refining exposure

and ~25% additional refining capacity (Fig.3) to be added during FY27F. HPCL (HPCL