Rising geopolitical tensions push Brent crude oil prices above $119, while stable domestic fuel prices limit the ability of Indian Oil Marketing Companies (OMCs) to pass on higher crude costs.
India’s state-run oil marketing companies (OMCs) could face mounting pressure on profitability as crude oil volatility intensifies due to escalating geopolitical tensions in West Asia, according to a research note from UBS.
The brokerage warned that the recent rally in global crude prices and refining margins is creating market conditions similar to the disruptions witnessed during the 2022 oil shock. Indian OMCs—including Indian Oil Corporation, Bharat Petroleum Corporation Limited and Hindustan Petroleum Corporation Limited — remain structurally exposed to rising crude costs because a large share of their earnings depends on fuel marketing margins.
According to UBS Global Research, integrated margins for these companies could come under significant pressure if crude prices remain elevated while domestic retail fuel prices stay largely unchanged. The brokerage highlighted that state-run refiners have limited flexibility to pass on higher crude costs to consumers due to the government’s influence over retail fuel pricing.
As a result, increases in global crude prices directly compress petrol and diesel marketing margins, which account for a substantial portion of profits for Indian OMCs.
UBS noted that ongoing geopolitical disruptions in West Asia could continue to push crude prices higher in the near term. The bank has raised its short-term oil price forecasts, estimating that Brent crude could average around $71 per barrel in the second quarter of 2026 and about $72 per barrel for the full year.
However, the brokerage cautioned that upside risks remain significant if energy infrastructure disruptions persist. In such a scenario, Brent prices could rise above $90 per barrel and potentially even cross $100 if supply flows tighten.
At the time of filing this report, Brent Crude was trading at around $119.25 per barrel, having surged nearly 91 per cent over the past three months amid escalating regional tensions.
UBS added that every $5 per barrel increase in crude prices—if not passed on through retail fuel price hikes—could significantly erode profits at Indian OMCs by squeezing marketing margins.
Retail fuel prices in India have remained largely stable since May 2022 despite fluctuations in global oil markets. This limited pricing flexibility, UBS said, constrains the ability of refiners and fuel retailers to offset rising input costs.
With geopolitical uncertainty persisting in West Asia and domestic fuel prices largely unchanged, UBS warned that earnings visibility for India’s state-run oil marketing companies could remain under pressure in the coming months.
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