US sanctions on Rosneft and Lukoil, along with the EU’s ban on refined products made from Russian crude, are unlikely to materially impact the margins or credit profiles of India’s state-run oil marketing companies (OMCs), according to Fitch Ratings.
However, Fitch noted that the actual impact will depend on how long the sanctions remain in place and how strictly they are enforced. Between January and August 2025, Russian crude accounted for around one-third of India’s oil imports, and its discounted prices have supported OMC profitability.
Indian Refiners Expected to Comply with Sanctions
Fitch expects Indian OMCs to largely adhere to the latest sanctions, although some refiners may still source Russian barrels that remain outside the sanctions list. India, once primarily reliant on Middle Eastern oil, shifted significantly toward Russian supplies after the February 2022 Ukraine invasion. The combination of Western sanctions and reduced European demand pushed Russian crude to India at deep discounts, causing imports to surge from less than 1% to nearly 40% in a short period.
Last month, the US imposed sanctions on Rosneft and Lukoil, which together supplied 75% of India’s Russian oil imports. While state-run refiners have stopped dealing with these producers, other Russian suppliers can continue selling.
Refining Margins Expected to Stay Resilient
According to Fitch, the sanctions could tighten global demand for products linked to the affected crude grades. This shift may widen refined product spreads, helping offset the loss of discounted Russian barrels. Refiners that continue to process Russian crude may also benefit from sharper discounts. Fitch added that ample global crude supply should keep oil prices under control. The agency expects Brent crude to average USD 70 in 2025 and USD 65 in 2026.
Greater Risk for Private Refiners with EU Exposure
Private refiners with strong EU market exposure may face higher compliance risks. Tracing the exact origin of crude becomes more complex once grades are blended. To manage this, these companies may need to:
- Shift exports to alternative markets
- Modify crude sourcing strategies
- Invest in better traceability systems
OMC Financial Performance Remains Stable
Indian OMCs reported EBITDA broadly in line with or slightly above expectations in the first half of FY26. This performance was supported by softer crude prices and strong gasoil spreads.
Gross refining margins (GRMs) averaged USD 6–7 per barrel, compared with USD 4.5–7 per barrel in FY25. Fitch expects GRMs to remain close to mid-cycle levels of around USD 6 per barrel in FY27, driven by steady domestic fuel demand and high refinery utilisation rates.
Government Support Strengthens Liquidity
A government-approved ₹30,000 crore support package for Indian Oil, Bharat Petroleum, and Hindustan Petroleum in the second quarter of FY26 will help offset losses from selling subsidised LPG. This funding is also expected to improve liquidity. As reported by msn.com, Fitch noted that the Issuer Default Ratings of all three OMCs remain strong due to robust state linkages and a high likelihood of sovereign support when required.
