India’s demand for petroleum products, including petrol, diesel, and LPG, is projected to increase by 3-4% in the current financial year ending March 31, 2025, according to a report by Fitch Ratings.
The growth is attributed to rising consumer demand, industrial expansion, and infrastructure development, the report noted.
For India’s oil marketing companies (OMCs), refinery margins are expected to decline below their mid-cycle levels in FY25, driven by weaker product cracks, regional oversupply, and reduced gains from price differentials between crude oil varieties.
However, the report highlighted that marketing margins would improve compared to FY24 due to lower Brent crude oil prices this fiscal year. “This improvement will help offset the pressure from reduced refining margins for oil marketing companies. Pure refiners, such as HPCL-Mittal Energy Limited (HMEL, BB+/Stable), will face greater profitability challenges,” the report said.
Fitch expects refining margins to recover to mid-cycle levels in FY26 as regional oversupply eases and Brent crude prices align with Fitch’s projections. It also anticipates that marketing margins will remain supportive. HMEL, which has limited rating headroom in FY25, is likely to see its position improve in FY26 as refining margins normalize.
For upstream companies like Oil and Natural Gas Corporation Limited (ONGC) and Oil India Limited (OIL), profits are expected to decline due to subdued production levels and lower crude oil prices. Domestic gas prices from older fields are forecast to remain capped at $6.5/MMBTU in the second half of FY25, as they are determined by a formula pegged to 10% of crude oil prices.
India’s overall oil and gas production is anticipated to remain flat in FY25. Crude oil output is expected to drop by 2-3%, as upstream companies continue to combat natural declines in production from ageing fields despite deploying technology to improve recovery rates and access isolated reservoirs.
Production is projected to grow modestly in FY26, supported by increased output from ONGC’s eastern offshore KG Basin and privately owned fields, the report added.
India’s dependency on crude oil imports is expected to rise in the short term, as the growth in demand for petroleum products outpaces the increase in domestic crude oil production.
(Inputs from IANS)
