Refining Margins Surge as Oil Prices Dip; Sector Poised for FY26-27 Expansion

Key Takeaways

• Bitumen Rates Vary Widely: VG30 in Mathura at ₹48,382/MT and VG40 in Karwar at ₹36,890/MT show significant regional pricing gaps.
• Base Oil and Lubricant Stability: SN150, Furnace Oil, and hydraulic/gear oils maintain stable pricing across Delhi, Kandla, and Bhiwadi markets.
• Crude Oil Under Pressure: Brent crude prices fell 22.9% YoY due to increased OPEC output and weaker global upstream investment.
• Refining Margins Rebound: GRM surged 121% YoY to $6.4/barrel, driven by lower input costs and stronger spreads for key refined products.
• Sector Outlook Positive: Analysts project strong FY26–27 growth, led by refining and CGD segments; RIL and GAIL among top picks.

Prices of Bitumen, Base Oil, and Lubricants Across Key Indian Markets

• Roadgrip Bitumen VG40 in bulk is priced at ₹36,890/MT in Karwar, while refinery-grade VG30 bulk bitumen is being offered at ₹48,382/MT in Mathura. 
• In Pithampur, Roadgrip Bitumen Emulsion RS1 (bulk) stands at ₹32,290/MT, and the SS1 variant in drum packaging is available at ₹33,390/MT. 
• Base Oil SN150 is priced at ₹68.5/kg in barrel form in Delhi, and its bulk counterpart is quoted at ₹62/ltr in Kandla. Virgin 180cST Furnace Oil in bulk is trading at ₹50/kg in Mundra. 
• For rubber process oils, Sephan Aromatic (barrels) is available at ₹45.5/kg in Mundra, while Iranol Aromatic (bulk) is priced at ₹44/kg in Mumbai. 
• In the lubricants segment, LubriEdge Hydraulic Oil 68 (bucket) is at ₹91/ltr in Bhiwadi, Gear Oil 150 (barrel) at ₹115/ltr, Rust Preventive Oil (WDM type, barrel) at ₹122/ltr, and Metal Working Fluid (Soluble Cutting Oil, barrel) at ₹112/ltr—all in Bhiwadi.

Demand-Supply Dynamics in the Oil & Gas Sector

• India's oil and gas sector continues to exhibit resilience amidst a volatile global energy landscape. Despite a turbulent market in recent months, the sector’s fundamentals remain strong.
• Demand for petroleum products, driven by sustained industrial and transportation needs, is expected to stay robust. The natural gas segment, particularly City Gas Distribution (CGD), is witnessing gradual recovery with favourable pricing and improved sourcing strategies.
• Crude oil prices declined significantly in May 2025—Brent Crude fell 22.9% YoY and 3.8% MoM—due to increased output by major OPEC producers such as Saudi Arabia and the UAE. This oversupply situation, however, prompted a decline in US rig counts, reflecting caution in upstream investment globally.
• Interestingly, refining margins have surged, with the benchmark Gross Refining Margin (GRM) reaching USD 6.4/barrel—an 85% MoM and 121% YoY jump. This boost is largely attributed to reduced crude input costs and strong crack spreads across key products like gasoline, gasoil, jet fuel, kerosene, and naphtha. 
• The natural gas market presented a mixed picture: while US Henry Hub prices fell due to oversupply and mild weather, Asian spot LNG prices (Japan Korea Marker) climbed 6.7% YoY, driven by regional consumption growth.

Market News

• According to Systematix Institutional Equities, India’s oil and gas companies are poised for steady growth despite global uncertainties. The brokerage projects average sales growth of 6% in FY26 and 7.8% in FY27, with EBITDA expected to rise by 12.9% and 9%, respectively. Profit after tax (PAT) is also forecast to increase by 13.3% in FY26 and 10.1% in FY27.
• Systematix highlights Reliance Industries (RIL), GAIL India (GAIL), Mahanagar Gas (MGL), and Gulf Oil Lubricants India (GOLI) as top investment picks, citing their operational strength and growth potential in a recovering sector.
• In Q4 FY25, the sector’s earnings remained largely flat YoY but improved sequentially, especially in the CGD and gas segments. Although EBITDA per standard cubic metre declined compared to last year, it showed signs of recovery quarter-on-quarter due to strategic price revisions and improved gas procurement.

Expert Opinion: Strong Growth Sentiments Remain

• The Indian oil and gas sector is expected to maintain positive momentum through FY26-27. With improving refining margins, strategic gas sourcing, and stable demand, companies are likely to benefit from both margin expansion and top-line growth. 
• The sector’s medium-term outlook remains bullish, particularly in refining and CGD segments.