Replacing Russian crude oil with a combination of barrels from the United States, Venezuela and the Middle East will increase the weighted average cost of crude oil by $1.5–2 per barrel for Indian refiners, impacting their gross refining margins (GRMs).
Ratings agency CareEdge in a commentary pointed out that the strategic advantage derived from procuring discounted Russian crude oil—at one point accounting for nearly 35-40 per cent of India’s crude oil import portfolio—is now expected to moderate significantly going forward.
This will be due to shifting geopolitical developments triggered by the US sanctions on major Russian crude oil entities, including Rosneft and Lukoil, in November 2025, as well as the European Union’s ban on products refined from Russian crude oil, which came into effect in January 2026, it added.
“Going forward, a compelled shift away from Russian crude toward a blend of Venezuelan, US and Middle Eastern grades is likely to increase the weighted average cost of India’s crude oil sourcing by $1.5–2 per barrel, directly compressing the GRM premium that Indian refiners have enjoyed in recent years,” CareEdge anticipated.
Hardik Shah, Director at CareEdge Ratings, said the performance of the Indian downstream oil sector is currently driven by the dual engines of high GRMs and healthy marketing margins.
“As we transition into FY27, the narrative is likely to shift from high GRMs to moderate but sustainable GRMs. While GRMs are expected to moderate from their recent peak levels due to global supply pressures and realignments in crude oil sourcing, they are likely to settle at $6–$8 per barrel, which is accretive to the historical average,” he explained.
However, the durability of this trend will depend on global crude prices remaining benign, though they can be susceptible to sudden geopolitical trade dynamics. With an expected moderation in GRMs and steady fuel retail prices, marketing margin is expected to improve going forward in the medium-term, Shah projected.
Indian Oil Marketing Companies (OMCs) have navigated a highly volatile margin environment over the past three fiscal years, marked by sharp fluctuations in GRMs amid rapidly evolving global market dynamics, CareEdge said.
GRMs declined from a high of $10–12 per barrel in FY24 to $4–6 per barrel in FY25 and further bottomed out to $2–4 per barrel in Q1 FY26. This downturn was driven by narrowing discounts on Russian crude oil, weaker product cracks, and heightened geopolitical uncertainties, it added.
“Thereafter, GRMs rebounded significantly to $8–10 per barrel in Q2 FY26 and further to $9-13 per barrel in Q3 FY26, thereby outperforming the Singapore benchmark. This improvement was supported by agile inventory management, a decline in crude oil prices, healthy product cracks, and wider discounts on Russian crude due to US restrictions on Russian crude oil trade,” it pointed out.
A defining theme in the latter half of FY26 is the gradual unwinding of the “Russian pivot,” which significantly supported India’s refining margins in FY23 and FY24.
India’s crude oil procurement profile has shifted markedly—from elevated dependence on Russian crude in FY24 (around 36 per cent) to about 30 per cent in Q3 FY26. This share is expected to fall further in Q4 FY26, the ratings agency projected.
Published on February 17, 2026