The oil and gas sector is positioned for a robust third quarter performance in FY26, with leading brokerages forecasting significant earnings growth driven by oil marketing companies and Reliance Industries. Multiple research firms have projected strong operational metrics despite mixed performance across different segments of the sector.

Sector-Wide Performance Outlook

Brokerages have presented optimistic forecasts for the oil and gas sector's Q3FY26 performance. The sector's aggregate EBITDA growth projections demonstrate strong momentum across key segments.

Oil Marketing Companies Leading Growth

Oil refining and marketing companies are expected to deliver exceptional performance in Q3FY26, benefiting from favorable market conditions. Average oil prices declined 10.00% YoY while retail sales remained unchanged, creating positive operating leverage for these companies.

Kotak Institutional Equities highlighted that elevated product cracks will drive sharply higher refining margins, though marketing earnings may weaken. The reported numbers are expected to receive additional support from LPG compensation of approximately ₹50.00 billion.

Refining Margin Improvements

Singapore Gross Refining Margin (GRM) showed sequential improvement, rising to $4.90 per barrel in Q3FY26 from $4.00 per barrel in Q2FY26. This improvement was driven by sustained strength in transportation fuel cracks.

Nuvama projects OMC EBITDA could surge 68.00% YoY, supported by strong GRMs and lower LPG under-recoveries. Kotak Institutional Equities expects EBITDA to rise 9.00-18.00% sequentially and 31.00-141.00% YoY, though volatility remains high.

Reliance Industries Growth Drivers

Reliance Industries is expected to post strong growth in Q3FY26, led by its oil-to-chemicals and digital segments. Nuvama estimates a 9.00% YoY rise in RIL's consolidated EBITDA, driven by strong performance in oil-to-chemicals and digital businesses, partially offset by muted retail growth and oil & gas weakness.

The oil-to-chemicals segment is expected to benefit from a 21.00% YoY growth in Singapore GRM, led by improved petrol and diesel spreads. Kotak Institutional Equities also projects better refining performance and weaker INR supporting the segment, though petrochemicals may remain weak.

Upstream Companies Face Headwinds

Upstream oil companies are expected to encounter earnings pressure as declining crude oil prices impact realisations. ONGC and Oil India are projected to report weaker performance compared to other sector segments.

Gas Companies Show Mixed Outlook

The gas segment presents a mixed performance outlook, with city gas distribution companies expected to show varied results. Indraprastha Gas Limited may benefit from a low base effect, while other players face different operational challenges.

Nuvama expects IGL and Gujarat Gas Limited's EBITDA per standard cubic meter to rise 7.00% YoY to ₹4.60 and ₹4.70 respectively, supported by lower operating expenses and softer spot LNG prices. Kotak Institutional Equities noted that benefits from lower Gujarat VAT and a low base will likely support IGL's performance.

For other gas companies, GAIL is expected to see EBITDA decline 7.00% YoY due to weak petrochemical margins and lower LPG realisations. Petronet LNG's EBITDA is likely to remain flat as modest volume growth gets offset by higher operating expenses.

The global oil market is experiencing significant turbulence as U.S. sanctions on Russia's largest oil producers send shockwaves through the industry. This development has put Indian oil and gas companies in the spotlight, with potential implications for their operations and stock performance.

Crude Oil Price Surge

The sanctions targeting Russian oil giants Rosneft and Lukoil have triggered a substantial increase in crude oil prices:

This price surge is attributed to the sanctions affecting companies that account for over 5% of global oil output, given Russia's position as the world's second-largest crude producer.

Impact on Global Oil Supply

The sanctions have prompted immediate reactions from major oil consumers:

• Chinese state oil companies have temporarily suspended Russian crude purchases.
• Indian refiners are expected to significantly reduce their imports of Russian oil.

These moves could potentially reshape global oil trade flows and impact supply dynamics in the short to medium term.

Indian Oil Companies Performance Expectations

Amid this global turbulence, the oil and gas sector in India shows mixed performance expectations:

Oil Marketing Companies

Marketing companies are projected to see significant EBITDA growth year-on-year:

• BPCL: 92.00% growth
• HPCL: 127.00% growth
• IOCL: 191.00% growth

This growth is primarily driven by elevated marketing margins:

• Diesel margins jumped 39.00% year-on-year
• ATF margins rose 22.00%
• LPG margins increased 4.00%, though LPG operations still recorded losses of around ₹4,000 crore

Gas Utilities

Gas utilities are facing challenges:

• GAIL's EBITDA may decline 26.00% year-on-year due to lower transmission volumes and weaker trading spreads
• City gas distributors are experiencing margin pressure from rising feedstock costs:
  • IGL: EBITDA projected to fall 9.00%, despite 5.00% volume growth
  • MGL: EBITDA projected to fall 10.00%, despite 9.00% volume growth
  • Gujarat Gas: EBITDA projected to fall 9.00%

Reliance Industries

Reliance's refining segment performed strongly despite moderation in petrochemical margins:

• Oil-to-chemical segment is projected to achieve ₹55,000-60,000 crore EBITDA
• 13.00-14.00% consolidated earnings growth expected

Market Outlook

Citi, a major financial institution, has provided its perspective on the oil market:

• Brent crude is expected to average around $60 per barrel.
• Market participants are keenly awaiting the upcoming OPEC+ meeting on November 2 for potential production adjustments.

This outlook suggests that while prices have surged, there's an expectation of some stabilization, though much depends on OPEC+'s decisions and the broader implications of the sanctions.

Conclusion

The oil market is at a critical juncture, with geopolitical tensions directly impacting global energy dynamics. Indian oil companies find themselves at the intersection of these global shifts, facing both challenges and opportunities. While oil marketing companies are expected to deliver strong quarterly growth, gas utilities are grappling with margin pressures. As the situation evolves, market participants will be closely watching for any changes in import strategies, pricing dynamics, and policy responses from key players in the global oil trade.