Oil Profits to Go up Upstream and Down Downstream in Q4 FY26

Why It Matters

The diverging profit trends show higher crude prices boosting upstream cash flow while squeezing downstream margins, reshaping earnings across India's oil value chain. Stakeholders must adjust strategies as these dynamics influence capital allocation, pricing and energy security.

Key Takeaways

• Upstream EBITDA expected to rise 6‑49% QoQ as Brent hits $81/barrel
• Downstream OMC EBITDA projected to fall 8‑50% despite revenue growth
• LPG under‑recoveries could reach $1.2 bn, up from $229 mn QoQ
• HPCL EBITDA may plunge 51% while ONGC sees 23% increase
• Gas utilities face 12‑38% EBITDA drop due to LNG disruptions

Pulse Analysis

India’s upstream oil and gas segment is riding a wave of higher crude prices, with Brent averaging $81 a barrel in the March quarter—up nearly 28% sequentially. The price surge lifts net crude realizations, allowing majors like ONGC and Oil India to forecast EBITDA gains of 23% and 49% respectively, even as production volumes dip modestly due to field decline and maintenance. This upside is amplified by the sector’s relatively low exposure to downstream price caps, positioning upstream firms to capture stronger cash flows and potentially accelerate capital spending on new fields or enhanced recovery projects.

Conversely, downstream oil marketing companies are grappling with a stark margin squeeze. While revenue is expected to climb 17%‑30% thanks to higher volumes, gross marketing margins on auto‑fuel have collapsed to roughly $0.02 per litre, down from $0.06 per litre a quarter earlier. The disparity stems from stable retail fuel prices amid a sharp rise in crude input costs, driving EBITDA declines of 8%‑50% across IOCL, BPCL and HPCL. LPG under‑recoveries illustrate the pressure, ballooning to about $1.2 billion versus $229 million in the prior quarter, as global LPG prices surge amid West Asian supply shocks.

The ripple effect extends to gas utilities and city‑gas distributors, where LNG supply disruptions through the Strait of Hormuz and a depreciating rupee have trimmed overall gas demand by roughly 10% sequentially. Companies like GAIL face EBITDA reductions of 12%‑38% due to weaker trading margins and lower transmission volumes. These headwinds signal a broader recalibration of India’s energy economics, prompting policymakers to consider strategic stockpiles, diversified import routes, and potential tariff adjustments to safeguard downstream stability while upstream firms capitalize on the price environment.