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Indian oil marketing companies (OMCs) are unlikely to see significant effect on their refining margins or credit profiles in the wake of the latest US sanctions on Russia’s largest crude oil producers and the European Union’s ban on refined imports derived from Russian crude, said Fitch Ratings.
The rating agency said the scale of impact would, however, depend on the duration and effectiveness of the sanctions.
How could sanctions alter global crude and product spreads?
The sanctions imposed by the West on Russian crude oil would dampen global demand for products tied to affected crude, leading to wider spreads for refined products. “This should help to mitigate downward pressure on refiners’ profitability as they use less discounted Russian crude, pay more for alternative supplies, and deal with more volatile shipping and insurance costs. Refiners that continue to process Russian crude may enjoy wider discounts on this portion of their crude use,” it said.
The US has sanctioned two Russian oil companies, Rosneft and Lukoil, to pressure Moscow into ending war with Ukraine. The two companies account for around 60 per cent of Russian oil supplies to India. The European Union has also banned import of petroleum products derived from Russian crude oil.
How reliant is India on Russian crude?
Russian crude accounted for around 33 per cent of India’s crude oil imports in the January–August 2025 period. The discounted price of Russian crude has provided support to Indian OMCs’ EBITDA and profitability, said Fitch.
Private refiners with significant EU export exposure could face additional sanctions-related risks, as proving compliance with the new sanctions regime could be challenging. Affected companies may opt to diversify sales to other markets, optimise their mix of different crude oil grades or invest in stronger compliance and traceability systems over the medium term, Fitch added.
What do refining margins look like for Indian OMCs?
Lower crude costs and robust gasoil spreads helped Indian OMCs maintain gross refining margins (GRMs) of around $6–7 per barrel in the first half of fiscal 2025–26, up from $4.5–7 a barrel in 2024–25.
“We expect lower crude costs, coupled with rising refined product demand in India and very high refinery capacity utilisation to offset risks to GRMs from slowing global growth, supporting mid-cycle levels of around USD6/bbl in FY27. We think marketing margins will remain steady, assuming that the authorities do not mandate lower retail prices or increase the excise duty on transport fuels,” said Fitch.
Which companies make up India’s OMC landscape?
Indian OMCs include state-run Indian Oil Corporation (IOCL), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) and private players Reliance Industries (RIL) and Nayara Energy.
