Indian Oil Marketing Companies Positioned to Withstand Sanctions Impact

Indian oil marketing companies (OMCs) are not expected to face significant pressure on refining margins despite U.S. sanctions on Russian oil giants. Fitch Ratings suggests the impact will be limited as discounts on Russian crude bolster OMCs' profitability. Government support further strengthens their financial standing.

According to a recent report by Fitch Ratings, the margins of India's oil marketing companies (OMCs) are not likely to come under substantial pressure, even with the United States imposing sanctions on two major Russian crude producers, Rosneft and Lukoil. The report states that the sanctions, paired with the European Union's ban on refined imports from Russian crude, are not expected to significantly alter the refining margins or credit profiles of the Indian OMCs covered in their review.

Fitch highlighted that although the sanctions' full impact will depend on their duration and enforcement, historical reliance on Russian crude—which comprised about 33% of India's imports from January to August 2025—has bolstered the EBITDA and profitability of Indian OMCs through discounted supplies. Despite public statements affirming compliance with these sanctions, some refiners might still process Russian crude sourced from non-sanctioned suppliers.

The report further suggests that sanctions could dampen worldwide demand for products linked to affected Russian crude. This shift may result in broader spreads for refined products, potentially mitigating pressure on refiners' profitability as they gradually decrease reliance on discounted Russian crude and switch to more costly alternatives amidst volatile shipping and insurance rates. Global crude's high spare capacity is expected to cap input cost inflation by stabilizing oil prices, with Brent crude projected to average USD 65 per barrel in 2026, down from USD 70 in 2025.

(With inputs from agencies.)