Oil marketing companies (OMCs) are facing mounting pressure as a sharp rise in crude oil prices has pushed marketing margins on petrol and diesel into negative territory, while losses on domestic LPG have widened, according to rating agency ICRA. The agency estimates that OMCs are currently incurring negative margins of Rs 8 per litre on petrol and Rs 9 per litre on diesel, with domestic LPG under-recoveries at around Rs 300 per cylinder in September.
OMCs face Rs 530 crore daily losses
With international crude prices rising while domestic retail prices of petrol, diesel and LPG remain unchanged, ICRA estimates the combined daily loss to OMCs at around Rs 530 crore.
The rating agency attributed the pressure to the escalation of the West Asia conflict and disruptions to key oil supply routes, which have driven up crude prices and increased costs for oil marketing companies.
“The escalation of the West Asian conflict and disruptions to key oil supply routes have led to a spike in crude prices in recent weeks, resulting in sizeable marketing losses and LPG under-recoveries for oil marketing companies,” ICRA Senior Vice-President and Co-Group Head, Corporate Sector Ratings Prashant Vasisht said.
Indian crude basket rises sharply
The Indian crude basket rose to USD 117.4 per barrel on September 21, 2026, compared with an average of around USD 66 per barrel in 2025-26, amid geopolitical tensions and supply disruptions in West Asia.
ICRA said elevated crude prices, coupled with unchanged domestic fuel prices, could weigh on the profitability and cash flows of OMCs. The companies may also need to increase short-term borrowings to meet higher working capital requirements.
LPG under-recoveries add to OMC pressure
The pressure on domestic LPG has also increased. ICRA said the cumulative negative LPG buffer stood at Rs 61,940 crore as of June 30, 2026.
The estimated loss on each domestic LPG cylinder was around Rs 500 in the first quarter of 2026-27 and remained at approximately Rs 300 in September.
ICRA said LPG under-recoveries could rise further if international prices remain elevated and domestic selling prices are not increased or additional government compensation is not provided.
OMC earnings outlook depends on crude, fuel prices
ICRA said the impact of the elevated crude prices on OMC earnings in 2026-27 will depend on several factors, including international crude prices, product cracks, retail fuel price revisions and government support for LPG under-recoveries.
“The impact on OMCs’ earnings in 2026-27 will depend on crude prices, product cracks, retail price revisions and government support for LPG under-recoveries,” Vasisht said.
Inputs from PTI
