Barring some macro risks, OMCs seem to be in a sweet spot

Global refining dynamics look favorable for Indian refiners and oil marketing companies (OMCs), given the tight inventories, and renewed demand in the European Union.

- DEVANGSHU DATTA

China's desire to consolidate its refining sector by shutting smaller capacities and upgrading outdated refineries has also led to short-term supply tightness.

Meanwhile, crude oil and gas prices are flat and Indian refiners are continuing to source Russian supply at a discount to Brent.

Hence, OMCs in the July-September quarter (Q2) of FY26, could pick up high gross refining margins (GRMs), and appear to be comfortably surpassing the benchmark Singapore GRM of $4.1 per barrel.

Chennai Petroleum, Mangalore Refinery & Petrochemicals (MRPL), Bharat Petroleum (BPCL), Hindustan Petroleum (HPCL), Indian Oil (IOC) and Reliance Industries (RIL) could all gain from higher GRMs.

China today has the largest refining capacity globally, with its refining capacity set to reach 21 million barrels per day (mb/d) in 2025. In 2023, the utilization peaked near 88 per cent. Chinese refineries ran at only 75 per cent of their capacity in 2024.

New mega plants and petchem-integrated complexes are coming online. But the short-midterm implications of Chinese upgrades will be tighter supplies.