Indian oil marketing companies are thriving amid global volatility: HSBC

The Indian oil marketing companies have thrived in a volatile global market, with support from the Indian government, HSBC Research said in a research note. According to HSBC, oil marketing companies have witnessed volatility in refining margins over the last six months, a potential risk in the U.S., which has prompted India to reduce its purchases of Russian crude oil and the depreciation of the Rupee against the U.S. dollar.

However, the Indian government has been backing oil marketing companies by supporting decisions which are in the best interests of the companies. Even in August, India imported 1.3 mbpd of Russian crude oil and promised to pay LPG under-recovery, which was incurred in FY24. All these factors, according to HSBC, have culminated in stocks of oil marketing companies rising by 14–23% in the last six months, whereas the Nifty50 has gained 12% in the same period.

The HSBC note also adds that the refining margin of oil marketing companies had expanded in the interim period, and the depreciation of the Indian rupee ate away some of the marketing margins. Despite these headwinds, the combined margins have remained steady at $22–25/bbl, higher than HSBC’s full-year estimates.

These factors have created a comfortable margin, a moat for oil marketing companies, which, according to HSBC, have historically been associated with highly volatile earnings. The global team of HSBC has forecasted a big surplus in oil from the fourth quarter of the calendar year 2025 onwards, with a downside risk to HSBC’s Brent oil forecast of $65/bbl for 2026. “This provides further cushioning to estimates.”

In August, the demand for auto fuel maintained momentum, growing 2.6% year-on-year. According to HSBC, petrol demand grew a strong 5.5% year-on-year, while diesel demand rose 1.2% year-on-year. The demand for aviation fuel is negative for a second consecutive month, declining 2.9% in August after declining 2.3% in July. “With recent trends in air traffic improving, we expect the decline to also reverse,” the note adds.

Overall demand for fuel increased by 2.6% year-on-year, supported by bitumen, the demand for which jumped 47.1% year-over-year. Oil marketing companies continue to add new outlets, according to HSBC, which reported an 8% year-over-year growth in July 2025. At the same time, they have added EV outlets, which now account for 30% of their total outlets.

According to HSBC, oil marketing companies must fund large capital expenditure plans, which gives them confidence that the government is unlikely to take away a large part of their margins by tweaking duties. “Also, a downside risk in oil prices provides further support to earnings.”