Indian Oil Marketing Companies: OMC Margin Meter: petrol / diesel margins back above pre-conflict levels

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Indian Oil Marketing Companies: OMC Margin Meter: petrol / diesel margins back above pre-conflict levels

and diesel margins for BPCL and IOCL are currently

higher than pre-conflict levels, while those for HPCL are at (for petrol) or above

(for diesel) February run-rates (given the current lower levels of integration for

HPCL) (Figure 3HPCLdieselmargins,adjustedforexternalpurchases-Rs3/literabove3Q-Figure 8IOCLpetrolmargins,adjustedforexternalpurchases-Rs3/literabove3Q). The headline spreads between petrol and diesel

retail prices and crude (the fully integrated, refining + marketing margin) are

now well above 3Q levels, while the standalone marketing margins are still

below pre-conflict run rates. OMC composite margins can consequently

improve even if oil prices remain c.$80/bbl - if petrol and diesel refining cracks

ease further. Both are still well above pre-conflict levels (Figure 12Dieselcracks, Figure 14Gasoline

cracks).

• 1Q numbers likely under stress: The decline in oil prices has come late in the

quarter and may not provide much support to core cash flow for 1QFY27. This

correction will also likely lead to material inventory losses for each of the three

companies (4QFY26 earnings were surprisingly strong - likely supported by

inventory gains as oil went up). In addition, media reports (here) suggest

borrowings at the three companies are hitting limits on losses incurred on

gasoline, diesel and LPG; estimating total losses for the three at c.Rs.1 trillion

(c.$10.5bn) for the quarter.

• 2Q onwards can be better, provided: the government does not raise excise

duties. The sharp reduction in these taxes has been a major driver of the

restoration of margins for HPCL/BPCL and IOCL. The government, however,