Indian oil refiners expect healthy refining margins in the coming months as disruptions to refining capacity in West Asia and Russia, declining fuel inventories and tight global product supplies continue to support fuel prices. These market conditions are creating opportunities for Indian refiners to benefit from stronger margins on diesel, gasoline and aviation turbine fuel (ATF).
Reliance Industries (RIL), Bharat Petroleum Corporation (BPCL), Indian Oil Corporation (IOC) and Hindustan Petroleum Corporation (HPCL) reported record refining performances in the September quarter (Q2). They expect favourable market conditions to continue, although rising crude premiums, freight and insurance costs, along with domestic fuel pricing constraints, could limit overall profitability.
Global Refinery Disruptions Support Refining Margins
Global refining capacity disruptions and lower fuel inventories have strengthened refined product prices. Reliance Industries reported that global refinery utilisation had declined to approximately 79%, compared with 82% before the conflict. Meanwhile, diesel and gasoline inventories remained below their respective five-year averages.
Although refinery outages peaked at nearly 11.8 million barrels per day, around 4–5 million barrels per day of capacity remained affected. Consequently, reduced product availability continued to support global refining margins. RIL expects these conditions, combined with uncertainty surrounding Russian refinery operations and Chinese refined product exports, to keep refining margins firm in the coming months.
Diesel, Gasoline and ATF Cracks Surge
Geopolitical disruptions have also significantly increased refined product cracks, strengthening the profitability outlook for oil refiners. During the September quarter, gasoline cracks nearly tripled year-on-year (YoY), while diesel cracks increased to approximately 3.5 times and ATF cracks to around 3.7 times their levels in the corresponding quarter last year.
Refining cracks represent the price difference between crude oil and the refined petroleum products obtained from it. Higher cracks generally improve refinery profitability, provided operating and procurement costs remain under control. Meanwhile, the Indian crude oil basket, which averaged approximately $65–70 per barrel in February, remained above $100 per barrel during most of the first quarter of FY27.
Diversified Crude Sourcing Supports Refinery Operations
Despite geopolitical tensions and shipping disruptions, Indian refiners have maintained strong crude processing levels by diversifying their import sources. Companies have expanded crude sourcing across Russia, the Americas, Venezuela, Brazil and selected African countries. This flexibility has helped refiners maintain uninterrupted operations and secure adequate feedstock supplies despite logistical challenges. As a result, Indian refiners sustained record crude processing levels, with refinery utilisation exceeding 100% at several facilities.
Outlook for Indian Oil Refiners
Favourable global product prices, supply disruptions and lower fuel inventories are expected to support refining margins in the coming months. However, refiners will need to manage higher crude procurement premiums, transportation expenses and insurance costs. As reported by ET Enegyworld.com, India’s diversified crude sourcing strategy and strong refining capabilities position domestic oil refiners to benefit from tight global fuel markets, although the extent of margin gains will depend on crude prices, operating costs and domestic fuel pricing conditions.
