New Delhi: The recent US sanctions on Russian oil giants Rosneft and Lukoil, combined with the EU’s ban on certain refined products, aren’t expected to significantly impact India’s state-run oil companies. That’s according to Fitch Ratings.
However, the full effects of these sanctions will depend on how long they last and how strictly they are enforced.
Between January and August 2025, Russian crude made up about a third of India’s oil imports. These imports have been a significant boost for Indian oil marketing companies due to the lower prices they offer.
Even with these sanctions, Fitch believes that most Indian refiners will comply. Some may still find ways to obtain Russian crude that isn’t under sanctions.
Since the February 2022 invasion of Ukraine, India’s oil imports from Russia increased dramatically. A drop in European demand made Russian oil available at steep discounts. This shift saw Indian imports of Russian crude soar from less than 1% to nearly 40% of all its crude imports in a short time.
After the most recent sanctions, Indian refiners have ceased purchasing from Rosneft and Lukoil, which account for 75% of oil sold to India. However, other sellers can still supply oil to India.
Fitch Ratings noted that these sanctions are unlikely to greatly affect the profit margins or credit ratings of Indian oil marketing companies. They predict that reduced global demand for products linked to Russian crude could, in fact, widen refining product spreads, which may help offset the loss of discounted Russian oil.
Refiners that continue processing Russian crude might even benefit from deeper discounts.
The overall availability of crude oil globally means that prices are expected to remain stable. Fitch forecasts Brent crude prices at around $65 per barrel in 2026, a slight decrease from $70 in 2025.
Private refiners, especially those engaged with the EU, might face bigger challenges. As they blend different grades of crude, verifying the origins of the oil becomes trickier, leading them to explore new markets or invest in better tracking systems.
Despite these challenges, Indian oil marketing companies have reported solid earnings. They are benefitting from favorable refining margins and strong demand domestically. In the first half of FY26, their gross refining margins averaged between $6 and $7 per barrel, a boost from previous years.
Looking ahead, Fitch expects these margins to stabilize around $6 per barrel in FY27, driven by steady local fuel demand and high operational efficiencies.
Furthermore, a recent support package of ₹30,000 crore from the government for major companies like Indian Oil, Bharat Petroleum, and Hindustan Petroleum is set to help mitigate financial losses from selling subsidized LPG. This package also aims to improve liquidity for these companies.
Fitch believes that all three companies have strong ties to the state, which will likely provide further support if necessary.
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