Pressure persists for oil retailers

Up and above Gross marketing margin on diesel and petrol in Q1FY26 so far is the highest in the past 17 quarters, thanks to a sharp drop in crude prices.

- Ashish Agrawal

The ceasefire in hostilities in West Asia announced by US President Donald Trump takes the pressure off crude oil prices. After rising by 25% since May-end, Brent crude has declined 13% from a peak of $78.3 a barrel on 19 June, as per Bloomberg.

Yet, with tensions still prevailing in the region, state-run Indian oil marketing companies (OMCs) remain vulnerable to the adverse impact of volatile oil prices on their earnings.

However, the bigger concern related to the risk of the closure of the Strait of Hormuz appears to have waned now. While India does not buy oil from Iran, Hormuz is crucial because almost 40% of India's oil imports in 2024 passed through this waterway.

The oil market remains subdued, with adequate supplies. Demand rose 0.8% in 2024 and is expected to grow at the same rate in 2025, according to the International Energy Agency.

Production by the Organization of Petroleum Exporting Countries and other associate countries (OPEC+), forming a cartel, stood at 36.7 million barrels per day (mb/d) in May.