UBS flags margin risks for Indian OMCs as crude volatility intensifies amid West Asia crisis
A research note from UBS has flagged rising risks for India's state-owned oil marketing companies as crude oil market volatility intensifies due to geopolitical tensions in West Asia.
ANI
Mar 09, 2026 11:04 IST
New Delhi [India], March 9 (ANI): A research note from UBS has flagged rising risks for India's state-owned oil marketing companies as crude oil market volatility intensifies due to geopolitical tensions in West Asia.
According to UBS Global Research, the recent rally in crude prices and refining margins is creating conditions similar to the disruptions seen during the 2022 oil market shock. The brokerage said Indian oil marketing companies are structurally vulnerable to higher crude prices because their earnings are heavily exposed to fuel marketing margins.
UBS said integrated margins for Indian state-owned oil marketing companies, including Indian Oil Corporation, Bharat Petroleum Corporation Limited and Hindustan Petroleum Corporation Limited, could come under pressure if crude prices remain elevated while domestic retail fuel prices stay largely unchanged.
The brokerage noted that OMCs have limited flexibility to pass on higher crude costs to consumers due to the government's influence over retail fuel pricing. As a result, rising crude prices directly compress marketing margins, which account for a significant portion of profits for these companies.
UBS said geopolitical disruptions in the West Asia region could push crude prices higher in the near term. The bank has raised its short-term oil price forecasts, estimating crude could average around USD71 per barrel in the second quarter of 2026 and around USD 72 per barrel for the full year.
However, the brokerage warned that upside risks remain significant if disruptions to energy infrastructure persist. In such a scenario, Brent crude prices could rise above USD 90 per barrel and potentially even cross USD100 per barrel if supply flows remain constrained.
UBS added that for Indian oil marketing companies, every USD5 per barrel increase in crude prices, if not passed on through retail fuel price hikes, could significantly erode profits by squeezing diesel and petrol marketing margins.
Retail fuel prices in India have remained largely stable since May 2022 despite fluctuations in global oil markets. UBS said this limits the ability of oil marketing companies to offset higher input costs.
The brokerage concluded that ongoing geopolitical uncertainty and limited pricing flexibility could continue to weigh on earnings visibility for India's state-owned oil refiners and fuel retailers.
At the time of filing this report Brent Crude was trading at USD 119.25, it has surged 91 per cent in last three months. (ANI)
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