Diesel boom lifts Reliance and Nayara, leaves state-run OMCs bleeding

Private refiners are cashing in on export margins, while state-run OMCs absorb losses from controlled pump prices and rising domestic demand

Diesel has proved to be a boon for private-sector refiners but a bane for state-run oil marketing companies (OMCs). Margins from converting crude oil into diesel dipped slightly on Thursday after the Group of Seven (G7) nations, under pressure from United States (US) President Donald Trump, agreed to release 100 million barrels of crude oil and diesel from their stockpiles over four months.

 

Analysts said the release might prove inadequate to cool diesel prices because it is equivalent to just one day of global oil consumption.

 

“Bullish short-term European Union (EU) and US diesel spreads and cracks, but Q1 2027, even at these elevated levels, looks undervalued,” said James Noel-Beswick, head of commodities at UK-based Sparta Commodities. Several factors have combined to supercharge the diesel complex, he added: low US diesel stocks, rising maintenance, approaching cold weather and Russia’s export ban.

 

 

International diesel prices averaged $164.5 a barrel on a free-on-board (FOB) basis in September, nearly twice the level a year earlier, according to Indian oil ministry data. Gasoline averaged $136 a barrel last month, up 70 per cent year-on-year.

 

Diesel cracks — the margin from converting crude oil into diesel — are currently at $50-70 a barrel, far above the long-term average of $16 a barrel, said Prashant Vasisht, senior vice-president at Icra, a Moody’s affiliate.

 

Reliance Industries, India’s biggest fuel exporter, stands to gain the most from the surge in global diesel prices, followed by Nayara Energy, which is controlled by Russia’s Rosneft and benefits from stronger refining and export margins. State-run oil marketing companies, led by Indian Oil, are meanwhile struggling to contain mounting losses on fuel sales, refining sources said.

 

A Reliance official said the company does not comment on market news.

 

New Delhi’s decision to lower the windfall tax on diesel and jet fuel exports for October also benefits private refiners. Even so, the windfall tax on diesel for the month works out to around $27 a barrel, allowing the government to capture at least a third of refiners’ export gains.

 

Reliance Industries’ Jamnagar special economic zone (SEZ) refinery, India’s biggest fuel export hub, is exempt from the windfall tax because of its status as an export facility, analysts said.

 

The diesel boom has created export opportunities for private-sector and standalone refiners, but it has also resulted in an opportunity loss of ₹20-30 per litre of diesel sold at the pump by OMCs, Vasisht said. State-run refiners are facing mounting losses because their primary task is to meet domestic demand while pump prices remain controlled, company officials said.

 

The losses have been aggravated by strong domestic demand for diesel and gasoline at a time when global product prices have been elevated by the eight-month war in West Asia. Diesel sales in September rose 5 per cent year-on-year to 1.77 million barrels per day (bpd). Diesel accounts for nearly 40 per cent of India’s fuel basket. Demand for the fuel had touched a record 2.14 million bpd in June, while petrol consumption rose 7 per cent to 1 million bpd last month, widening OMCs’ losses.

 

Diesel commands a steep premium in the current market after the West Asian conflict widened with the entry of Houthi rebels and amid threats to global diesel supplies from the US and Russia, the world’s two biggest exporters of the fuel.

 

Russian President Vladimir Putin said in Moscow this week that Russia would not supply diesel to world markets unless sanctions were lifted. China has also suspended diesel exports this week, and the duration of the ban remains uncertain, UK-based publisher Energy Intelligence said. “Losing these volumes — particularly diesel — will further tighten the highly vulnerable global products market.”

The export maths

The value of India’s total petroleum product exports rose 36 per cent year-on-year to $21.7 billion in April-August, with private-sector refiners capturing most of the gains. Reliance and Nayara together accounted for nearly 80 per cent of clean fuel exports by volume in September, according to calculations based on shipping data.

 

State-run OMCs, however, were incurring losses of ₹530 crore a day on the sale of petrol, diesel and liquefied petroleum gas (LPG) cylinders as of September because domestic retail prices for downstream fuels remained unchanged, according to Icra.

 

Mumbai-based brokerage DAM Capital said that at crude oil prices of $102 a barrel, OMCs were losing ₹17.3 a litre on retail sales, or marketing margins, of diesel and gasoline. Gross refining margins averaged $35 a barrel, but that may not be enough to offset marketing losses, a Mumbai-based analyst said.

 

The arithmetic for private-sector refiners is straightforward. In April-August 2026, a month after the US and Israel attacked Iran and sent global energy markets into turmoil, Reliance processed 757,000 bpd of crude at its 700,000 bpd export-oriented refinery in Jamnagar, according to oil ministry data.

 

In September, Reliance exported 929,000 bpd of clean fuels, such as gasoline, diesel and jet fuel, accounting for more than 70 per cent of India’s clean-fuel exports, according to calculations based on data from maritime intelligence agency Kpler. Diesel/gasoil made up 489,000 bpd, or more than half of its total exports, followed by gasoline at 195,000 bpd and jet fuel at 101,000 bpd. Most of Reliance’s exports are from the SEZ refinery. Nayara Energy was the second-biggest exporter, shipping more than 100,000 bpd.