Oil refiners to report strong Q3 performance aided by high refining margins

The state-run refiners are expected to report gross refining margins of $10-13 per barrel in the third quarter of FY26, aided by strong product cracks and benign crude prices

Indian oil refining and marketing companies are likely to report strong performance in the third quarter of financial year 2025-26 (Q3FY26) amid significant improvement in gross refining margins (GRMs) and healthy marketing gains due to benign crude oil prices.

 

Marketing margin refers to the profit booked on sale of refined products such as petrol and diesel, while gross refining margin (GRM) reflects profit booked on turning a barrel of crude oil into refined products. 

Major state-run refiners include Indian Oil Corporation (IOCL), Bharat Petroleum (BPCL), Hindustan Petroleum (HPCL) and private player Reliance Industries Ltd (RIL).

 

Indian refiners benefitted from stronger key product cracks, which continued to trade at a premium to the benchmark, said Yes Securities in a note. The brokerage expects companies to post sequential improvement in core GRMs.

 

The state-run refiners are expected to report GRMs within $10-13 per barrel in the third quarter of FY26, as against margins of $3-6 per barrel last year, said Elara Capital.

 

RIL’s GRM during the quarter is likely to be $13.4 a barrel, higher than $10.4 per barrel in the same period last year. The company is likely to witness a strong 13 per cent year-on-year (Y-o-Y) Ebitda growth led by strong performance of oil-to-chemicals (O2C) business and digital services or telecom earnings, said Elara Capital.

 

The marketing margins of the oil companies are also likely to remain healthy during the quarter amid subdued crude oil prices.

 

Brent crude price averaged at $63.1 per barrel during the quarter, down $10.9 a barrel year-on-year and $5 quarter-on-quarter (Q-o-Q).

 

The gross marketing margins for MS (petrol) and HSD (diesel) averaged around ₹7.38 and ₹5.25 a litre, respectively, in the quarter. Additionally, India’s petroleum products consumption remained robust in the quarter leading to higher sales for the OMCs.

 

The state-run oil marketers’ performance would also be supported by the government’s compensation for under-recovery on sale of liquefied petroleum gas (LPG) cylinders.

 

The overall performance of OMCs is expected to improve due to lower LPG burden and recovery of earlier LPG subsidy losses from November 2025 on a monthly basis, said Yes Securities. However, the forex losses are expected to weigh on earnings, it said.

 

The Union cabinet recently approved compensation of Rs 30,000 crore for the three state-owned OMCs for the losses incurred on sale of LPG cylinders.