September 24, 2026: State-owned oil marketing companies (OMCs) are facing increasing pressure on their fuel marketing margins as a sharp rise in crude oil prices has not been matched by revisions in domestic petrol and diesel prices, according to rating agency Icra.

Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) are currently estimated to be incurring losses of around Rs 8 per litre on petrol and Rs 9 per litre on diesel. The companies are also facing under-recoveries of approximately Rs 300 on every domestic LPG cylinder, Icra said.

The rating agency estimates that the combined daily losses for the three OMCs have risen to around Rs 5.30 billion  at current price levels.

The cost of India’s crude oil basket has consequently risen substantially. It stood at $117.4 per barrel on September 21, 2026, compared with an average of around $66 per barrel during 2025-26.

The sharp increase in crude costs is putting pressure on the fuel marketing business despite relatively favourable refining margins. Singapore gross refining margins have remained above $10 per barrel since the onset of the West Asia crisis, aided by refinery outages, supply disruptions and a drawdown in inventories, Icra said.

However, stronger refining margins may not be sufficient to fully offset the impact of higher crude and petroleum product prices on the OMCs’ overall financial performance. Icra expects elevated input costs to put pressure on profitability and cash flows and could also increase the companies’ near-term working capital requirements and borrowing needs.

The impact on OMC earnings during 2026-27 will depend on several factors, including the trajectory of crude oil prices, petroleum product cracks, any changes in domestic retail fuel prices and the extent of government support provided for LPG under-recoveries, according to the rating agency.

(Source: The Statesman)