India’s oil and gas sector to remain under pressure as crude, LNG costs rise
Equirus said oil marketing companies face worsening petrol margins and deeply negative diesel margins, while integrated margins have moderated
India’s oil and gas sector will likely face ongoing pressure in the near term, according to brokerage firm Equirus. Elevated crude prices, expensive imported liquefied natural gas (LNG), and weak fuel marketing margins are squeezing downstream profitability. Despite strong refining cracks providing some cushion, integrated margins have moderated from their recent peaks, indicating that higher refining economics may not fully offset marketing-side pressure.
Refining economics continue to offer support, with gasoline cracks 45% above their one-year average, gasoil cracks 82% above average, and jet fuel cracks rising 71.6% year-on-year. The gas segment, however, is under significant strain from soaring spot LNG prices, which jumped to $24/MMBtu in the week ending September 4, up 60.6% year-on-year and 22.3% over three months.
Equirus expects LNG imports to soften from September amid strong August arrivals, but higher LNG prices are starting to affect gas-consuming businesses' cost structures. The LPG market is undergoing a structural shift due to disrupted West Asian supplies, with India sourcing more from the US and developing additional non-Gulf supply channels at higher costs.
While geopolitics, crude prices, LNG availability, and freight costs are key variables for margins over the coming months, sustained weakness in marketing margins and higher gas and LPG sourcing costs could keep overall downstream profitability volatile.
Written by urgent.news from Hindu BusinessLine's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
