Lower crude oil prices may offer relief, but analysts warn that weak first-quarter earnings and policy risks could continue to pressure OMC profitability in FY27.
A sharp decline in crude oil prices following easing Middle East tensions has improved sentiment for oil marketing companies (OMCs), but analysts caution that the first quarter of FY27 is still likely to significantly impact profitability.
Crude oil prices have fallen sharply in recent weeks, with Brent crude slipping below $80 per barrel, its lowest level since March 2026. The decline comes after the signing of a ceasefire agreement between the United States and Iran, reducing immediate concerns about supply disruptions in the Middle East.
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Analysts at PL Capital said oil prices could soften further if the US-Iran situation continues to improve and normal shipping operations resume through the Strait of Hormuz.
However, they believe the decline may not be permanent. Countries are expected to rebuild strategic petroleum reserves and replenish inventories after recent disruptions, which could increase demand and push crude prices higher again.
Despite the recent correction in crude prices, analysts expect oil marketing companies to report a challenging first quarter.
According to PL Capital estimates, OMCs may face under-recoveries of around ₹7 per litre on petrol and ₹10 per litre on diesel during Q1 FY27, even after factoring in the excise duty reduction and limits on refining margins.
The benefit from lower crude prices arrived too late to fully offset the impact of elevated input costs and weaker marketing margins experienced during much of the quarter.
Another major risk identified by analysts is the possibility of the government reversing the excise duty cut introduced during the energy crisis.
The duty reduction was implemented as a temporary measure to shield consumers from high fuel prices. With crude prices now easing and fuel retail prices having increased, policymakers could gradually withdraw the tax relief.
Such a move could affect earnings prospects for oil marketing companies despite improvements in crude markets.
Outlook for FY27
Analysts believe near-term market sentiment has improved following the easing of geopolitical tensions and lower oil prices.
However, they caution that Q1 losses, uncertainty surrounding future fuel taxation and the possibility of higher oil demand later in the year mean profitability is likely to remain under pressure throughout FY27.
Lower crude oil prices generally benefit consumers and fuel retailers, but the latest analysis suggests Indian oil marketing companies may continue to face earnings challenges despite improving market conditions. The combination of weak first-quarter performance and policy uncertainty could shape the sector's outlook for the rest of FY27.
Published: 21 Jun 2026, 11:07 am IST
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