A sharp rise in global crude prices could redraw the earnings landscape of India’s oil and gas sector, triggering winners and losers across the value chain, according to Elara Capital. The brokerage warns that oil marketing companies face severe margin pressure and potential earnings collapse if crude breaches key thresholds, while standalone refiners and integrated players stand to gain from surging refining margins.
With India’s fuel tax buffer thinning above USD 110 a barrel and macro risks building, from inflation to fiscal slippage, the brokerage noted that an extended oil shock could ripple through corporate profits, fuel prices, and the broader economy.
Elara Capital on India Oil and Gas
- Crude shock driving sharp earnings divergence across oil sector
- OMC EBITDA could collapse over 400 per cent in extreme scenarios
- Standalone refiners EBITDA could expand 10 to 15 times
- Every USD 10 crude rise cuts OMC fuel margins Rs 6.3 per litre
- LPG loss rises Rs 10.2 per kg per USD 10 crude rise
- Annual LPG under recovery rises about Rs 328 billion
- GRMs rise about USD 5 per barrel per USD 10 crude increase
Elara Capital on India Fuel Prices
- India tax buffer protects fuel prices up to about USD 110 crude
- Above USD 110 crude retail fuel price hikes become unavoidable
- At USD 125 crude fuel prices may rise Rs 8 to Rs 14 per litre
- At USD 150 crude fuel prices may rise Rs 26 to Rs 30 per litre
- Every USD 1 crude rise increases LPG subsidy by about Rs 33 billion
- LPG under recovery may reach Rs 1.4 trillion to Rs 3 trillion scenarios
Elara Capital on OMCs
- OMCs most vulnerable to high crude prices
- Earnings could fall 90 per cent to 190 per cent without policy support
- Retail margin collapse and LPG losses pressure earnings
- HPCL and BPCL most exposed among OMCs
- IOCL relatively better placed due to refining exposure
- Elara Capital on Standalone Refiners
- Standalone refiners strongest beneficiaries of higher crude
- GRMs rise about USD 5 per barrel per USD 10 crude increase
- MRPL and Chennai Petroleum likely major beneficiaries
- Policy intervention risk rises if margins remain elevated
Elara Capital on Reliance Industries
- Reliance GRM rises about USD 2.5 per barrel per USD 10 crude
- Higher crude prices also support upstream earnings
- Balanced portfolio reduces earnings volatility
Elara Capital on GAIL
- GAIL relatively defensive among gas companies
- Only about 16per cent marketing volumes linked to Hormuz LNG
- About 30 per cent transmission volume exposed to Hormuz flows
- LPG and liquid hydrocarbon output could rise about 60 per cent
- Output may reach about 1.3 mn tonnes versus CY25
- Morgan Stanley on Asia Energy Supply
- Asia crude inventories about 65 to 70 days
- Energy rationing emerging across Asian economies
- LNG LPG usage being curtailed for chemicals and ceramics
- Power shortages risk in Thailand Taiwan Korea
- These markets hold only about 10 to 15 days LNG inventory
- Coal generation being ramped up to offset gas shortages
Citi on India Strategy
- Three month disruption risks 20 to 30 bps GDP downside
- FY27 inflation risk rises about 50 to 75 bps
- Fiscal deficit risk rises about 0.1 per cent of GDP
- Current account deficit risk rises about USD 25bn
- Nifty target multiple cut to 19 times forward PE
- Dec 2026 Nifty target set at 27,000
- Oil shock impacting multiple supply chains across sectors
(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money related decisions.)
