OMCs likely to register strong Q3FY26 on higher refining margins

Recognition of LPG under-recovery compensation from November 2025, along with lower per-cylinder LPG under-recoveries on-quarter, should provide support to blended marketing margins, as per Motilal Oswal.

• Oil marketing firms set for strong Q3FY26 on robust refining margins
• Standalone EBITDA for HPCL, BPCL, IOC to rise 9-18% sequentially
• Brent crude forecast at $60/bbl for FY27/28 amid global oversupply

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State-run oil marketing companies are expected to register a strong third quarter (Q3FY26) on the back of healthy refining margins, according to analysts.

In the Oct-Dec quarter of FY26, average oil prices declined by 6% on a sequential basis and 10% from last year, while retail prices were unchanged.

“Due to elevated product cracks, refining margins will be sharply higher and implied marketing earnings weaker,” Kotak Institutional Equities said in its report.

Motilal Oswal expects the standalone EBITDA for Hindustan Petroleum, Bharat Petroleum, and Indian Oil to increase 9-18% on a sequential basis, due to strong refining margins and receipt of LPG compensation.

As per the brokerage, Singapore Gross Refining Margin averaged $7.5 per barrel in Q3FY26 against $3.8 per barrel in Q2FY26, while marketing margins for motor spirit (petrol) or high speed diesel were down 3% and 8% sequentially, respectively.

“Diesel, gasoline and ATF GRMs improved meaningfully QoQ during the quarter, supporting blended refining margins. However, the sharp QoQ decline in crude prices is expected to result in inventory losses, partly offsetting the strength in product cracks,” Motilal Oswal said in its preview.

That said, recognition of LPG under-recovery compensation since November 2025, along with lower per-cylinder LPG under-recoveries on-quarter, should provide support to blended marketing margins, as per Motilal Oswal.

For the upstream sector, analysts expect oil and gas sales volumes to remain largely flat from the same period last year and from the previous month. Crude oil realizations are, however, likely to see a sharp decline on-year and sequentially for ONGC and Oil India, Motilal Oswal said.

Kotak Institutional Equities expect ONGC’s EBITDA to decline 10% yoy and 3.6% sequentially and that of Oil India’s by 2.7% yoy and 4.7% sequentially. “For ONGC, we expect net oil realizations to decline 9% sequentially (15% yoy) and gas realizations to decline 3% sequentially (flat yoy),” it said.

Brent crude oil prices fell by $5.4/bbl on a sequential basis to $63.6/bbl, as global oversupply from high OPEC+ output outpaced weak demand growth, exacerbated by US-China trade tensions and economic slowdown concerns, as per Motilal Oswal.

The International Energy Agency now estimates global oil supply growth to exceed demand growth by 1.5 million barrels per day in 2026. “Hence, we remain bearish on crude prices and maintain our Brent price forecast of $60/bbl for FY27/28,” Motilal Oswal said.