Russian Oil Sanctions have completely changed the global energy market. A report by Nuwama Institutional Equities suggests that due to more supply and disruption in the flow of Russian oil, crude oil prices could remain under pressure in the near future. However, this may not directly benefit government oil marketing companies like Indian Oil Corporation (IOC), Bharat Petroleum (BPCL), and Hindustan Petroleum (HPCL).
The report mentions that a large amount of oil has accumulated as floating storage in the sea due to sanctions on Russian crude oil. As these barrels slowly make their way to big consumer markets like India, the global oil market may face an oversupply situation. According to FGE Nexcent, there could be an excess of around 2 million barrels daily, which could lead to Brent Crude prices remaining in the range of $55 to $60 per barrel in 2026.
The report also highlights that lower crude oil prices are beneficial for India’s public sector oil and gas companies as it reduces input costs and lowers pressure on domestic fuel prices. It also allows the government to control prices. However, the real earnings determination for IOC, BPCL, and HPCL is lower than crude oil prices and higher than refining margins.
Sanctions on Russian oil trade and on Russian refined products by the European Union have put approximately 1 million barrels of Russian diesel and fuel oil exports at risk daily. This has led to a decrease in global product supply and strengthened refining margins. Particularly, margins for middle distillates like diesel have increased, which are a crucial part of Indian public sector oil companies’ production.
According to the report, Singapore benchmark refining margins could stabilize in the long term at $6 to $7 per barrel level. This level is considered favorable for India’s government refineries as their refinery configurations are complex. They are capable of processing heavy and discounted crude. Additionally, strong domestic demand provides these companies with additional security.
The report states that IOC, BPCL, and HPCL will benefit from their large-scale operations, integrated logistics, and extensive retail networks. These companies are centered on the domestic market, which limits the direct impact of global export bans on them. A regulated pricing mechanism has also become a stability factor for them.
However, the report also warns that an increase in global crude oil storage, fluctuations in refinery utilization rates, and the addition of new global refining capacities could lead to volatility in margins in the near future. If there is a rapid decrease in commercial tension with Russia, pressure on product cracks could increase, affecting refining margins.
According to Nuwama, the strict regulations of the European Union could indirectly affect Indian refineries, but the impact would be more on private exporters. Public sector oil companies focused on domestic consumption are relatively limited risk as their profitability depends mainly on domestic demand and government pricing policies.
In conclusion, the report indicates that lower crude oil prices and structurally strong refining margins will support IOC, BPCL, and HPCL. Despite this, geopolitical tensions and global energy sanctions will continue to create instability in the energy market, potentially putting pressure on the earnings of government oil companies.
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