Crude oil prices, which have remained elevated since the outbreak of the war in the Middle East, are expected to weigh on the profitability of the three state-run oil marketing companies (OMCs)—Hindustan Petroleum Corporation (HPCL), Bharat Petroleum Corporation (BPCL), and Indian Oil Corporation (IOC).
Higher crude prices increase the cost of refining and fuel production, squeezing marketing margins if retail fuel prices are not revised accordingly.
Dhaval Popat, Analyst – Energy at Choice Institutional Equities, said state-owned oil marketing companies (OMCs) remain the most vulnerable to crude oil prices sustaining above $100 per barrel, particularly if retail petrol and diesel prices remain unchanged.
Popat expects HPCL to face the highest earnings pressure, followed by IOCL and BPCL, as elevated crude prices compress marketing margins, potentially offsetting the benefits of stronger refining margins.
Popat said city gas distribution (CGD) companies, including IGL, MGL, , and , could face margin pressure if higher gas procurement costs cannot be fully passed on to consumers.
Meanwhile, GAIL and remain exposed to potential volume weakness and gas-sourcing risks, although their regulated or contracted businesses provide some insulation, he noted.
According to Popat, the key earnings risk is not crude oil prices remaining above $100 per barrel alone, but the inability of companies to pass higher input costs on to end consumers.
He added that tightness in global middle-distillate markets could support refining profitability, making OMC marketing margins the principal area of concern.
Despite the pressure on OMC marketing margins, Popat identified CPCL as the brokerage’s top pick, with a target price of ₹1,885 per share. He also assigned MRPL a target price of ₹215 per share.
Crude prices rebound
Kaynat Chainwala, AVP Commodity Research at Kotak Neo, said Brent crude rebounded towards $107 a barrel as supply risks remained in focus. She noted that Tehran was reportedly planning to step up strikes on tankers near the Strait of Hormuz using new tactics, with the aim of keeping prices elevated ahead of the US midterm elections.
Meanwhile, a Houthi strike caused a limited fire at an Aramco office building in Dhahran, adding to concerns over risks to regional energy infrastructure.
Chainwala highlighted that Saudi Arabia plans to increase the capacity of its East-West pipeline to 10 million barrels per day over the next two to three years, providing a longer-term hedge against dependence on the Strait of Hormuz.
Likely to remain volatile in near term
The rebound in Brent followed a quieter Tuesday, when prices fell just under 1%, while WTI crude edged up 0.4%, as traders assessed the rise in vessel attacks alongside the Russian diesel arrangement.
According to Chainwala, the International Energy Agency has cautioned that limited Russian refining capacity means the arrangement is unlikely to materially alter the global diesel balance, restricting its potential to offset supply concerns.
She also pointed out that OPEC cut its 2026 oil demand growth forecast for the sixth consecutive month but raised its outlook for 2027, indicating the need to rebuild inventories depleted by the war.
Looking ahead, Chainwala expects crude oil prices to remain driven by geopolitical headlines. While recovering Saudi output and Russian diesel flows could point to a looser supply-demand balance, she said attacks on Gulf shipping and energy infrastructure, thin inventories, and a persistent geopolitical risk premium are likely to limit the extent of price corrections.
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