The outlook for India’s oil marketing companies is beginning to improve as tension in the Middle East eases. The global brokerage house,Jefferies has turned constructive on select state-run energy stocks.
According to the brokerage report, the recent decline in crude oil prices could help improve profitability across the oil marketing business.
As a result, Jefferies has reiterated its ‘Buy’ rating on two major oil marketing companies – Bharat Petroleum Corporation (BPCL) and Indian Oil Corporation (IOCL).
BPCL and IOCL remain Jefferies’ preferred picks
Jefferies has maintained a positive view on both BPCL and IOCL following the recent correction in their share prices.
| Company | Rating | Upside Potential |
| BPCL | Buy | 37% |
| IOCL | Buy | 24% |
Jefferies, in its report, noted that BPCL and IOCL saw sharp declines since the start of the Middle East conflict. This has created what it views as an attractive risk-reward opportunity for long-term investors.
The report noted that “BPCL and IOCL are down 19% and 23% respectively since the start of the Middle East conflict” and continues to recommend both stocks.
Falling crude prices are changing the picture
One of the biggest reasons behind the improving outlook is the sharp decline in global crude oil prices.
As per the brokerage report, Brent crude has corrected to nearly US$83 per barrel after fears of a prolonged conflict in the Middle East eased.
Jefferies highlighted that “Peace in the Middle East should gradually normalize energy prices.”
For India, which imports a significant portion of its crude oil requirements, lower crude prices generally reduce pressure on fuel retailers and improve profitability across the sector.
Marketing losses have narrowed significantly
Apart from this another key factor highlighted by the brokerage house in its report is the sharp reduction in fuel marketing losses.
As per the brokerage house report, the elevated crude prices and high fuel costs had previously resulted in losses on petrol and diesel sales. Howsoever, the situation has improved considerably over the past few weeks.
The report stated that “marketing losses on petrol and diesel at Spot Brent have narrowed to Rs (-) 2/lt and Rs (-) 11/lt.”
Jefferies believes that if crude prices remain near current levels and freight costs normalise, profitability from fuel marketing could turn positive again.
The brokerage added that “marketing margins at Spot Brent will rise above normative levels” under a more stable operating environment.
Refining margins remain unusually strong
While crude oil prices have fallen, refining margins continue to remain elevated.
The brokerage report noted that the refining profitability has benefited from disruptions caused by the conflict.
Jefferies noted that “Singapore GRM prevails at $18/bbl” and remains significantly higher than levels seen before the conflict began.
The brokerage estimates that around 3.4 million barrels per day of refining capacity have been impacted since the start of the conflict, which continues to support refining economics.
As per the report, the normalisation of supply chains may take time, allowing elevated refining margins to persist through the first half of FY27.
Could excise duty changes return?
Jefferies in its report also highlighted a possible policy development that investors should monitor.
Earlier this year, the government reduced excise duty on petrol and diesel to provide relief to oil marketing companies. However, if fuel marketing profitability improves substantially, there could be room for policy adjustments.
“The government could raise excise duty to partially offset the earlier reduction,” as per the brokerage house.
What investors need to watch next
Jefferies pointed out in its report that the next few months will largely depend on how quickly shipping activity through the Strait of Hormuz normalises and whether crude prices remain near current levels.
Disclaimer: The market views, stock ratings, and price projections mentioned in this article are based on third-party brokerage research and are compiled for informational purposes only. They do not constitute a direct offer, solicitation, or recommendation to buy, sell, or hold any specific securities. Equity investments are inherently subject to market risks, and past performance does not guarantee future outcomes; readers are strongly advised to verify financial data independently and consult a SEBI-registered financial advisor before making any investment decisions. This disclaimer has been generated using AI to support user well-being and responsible content consumption.
