(HT)
India, the world’s third largest oil importing and consuming nation, is likely to save as much as ₹1.8 lakh crore on import of crude oil and LNG if the trend of softening international energy rates continues, Icra said Wednesday.
India, which meets over 85% of its crude oil needs through imports, spent $242.4 billion on buying crude from overseas in the fiscal year ended March 31, 2025. With domestic production meeting roughly half of the demand, it also spent $15.2 billion on import of liquefied natural gas (LNG) in the fiscal.
Oil prices in international markets fell to over four-year low of $60.23 per barrel earlier this week on fears of rising global supply at a time when demand outlook is uncertain. Brent crude and US West Texas Intermediate crude, which fell to their lowest since February 2021, have since risen to $62.4 on signs of more Europe and China demand and less US output. Still the rates are $20 per barrel lower than March 2024 when petrol and diesel prices were cut by ₹2 per litre each ahead of general elections.
“Icra expects average crude prices for FY2026 (April 2025 to March 2026 fiscal year) to remain in the $60-70 per barrel range,” the rating agency said in a note.
At these levels, earnings of upstream companies is estimated at ₹25,000 crore for FY2026. Upstream companies are ones that produce crude oil.
“However, there would be savings of ₹1.8 lakh crore for crude imports and ₹6,000 crore for LNG imports,” it said.
For fuel retailers, the marketing margins on auto-fuels will remain healthy, while LPG under-recoveries are likely to reduce, Icra said.
Uncertainty related to global tariffs and their impact on growth, coupled with an announcement by OPEC+ to steadily withdraw their production cuts, starting with 411,000 barrels per day addition from May 2025 and another 411,000 bpd from June 2025, have resulted in oil prices declining from about $77 a barrel as on March 31 to about $60-62.
Stating that India meets a large portion of its domestic crude oil requirements through imports, Icra said in the scenario where crude remains in $60-70 a barrel range, the profit before tax for upstream players in FY2026 is expected to be lower by ₹25,000 crore.
In spite of this, Icra foresees the capex plans of domestic upstream players to remain intact.
Marketing margins on auto fuels for oil marketing companies (OMCs) would remain above long term average of ₹2.5-4 a litre and under recoveries on LPG are expected to reduce with decline in crude prices.
While petrol and diesel prices are deregulated, the government controls cooking gas LPG prices. OMCs sell the fuel at way below cost and are compensated for the under-recovery by way of subsidy from the government.
Lower LPG under-recovery and compensation by the government would support profitability of downstream companies, despite the increase in excise duty on auto fuels by ₹2 a litre with effect from April 8, 2025.
