Fitch: Sanctions on Russian oil unlikely to hit Indian OMCs hard

New Delhi, Nov 17 (PTI) US sanctions on Rosneft and Lukoil, along with the EU's ban on refined products derived from Russian crude, are unlikely to materially dent the margins or credit profiles of India's state-run oil marketing companies, Fitch Ratings said.

The ratings agency warned, however, that the eventual impact will hinge on how long the sanctions last and how strictly they are enforced.

Russian crude made up about a third of India's oil imports between January and August 2025, and its discounted rates have been a key boost to OMC profitability.

Fitch expects the companies to adhere to sanctions, though some refiners may continue sourcing unsanctioned Russian barrels.

Traditionally reliant on Middle Eastern oil, India significantly increased its imports from Russia following the February 2022 Ukraine invasion. Western sanctions and reduced European demand made Russian oil available at steep discounts. As a result, India's Russian crude imports surged from under 1 per cent to nearly 40 per cent of its total crude oil imports in a short span.

The US, however, last month imposed sanctions on Russian oil producers Rosneft and Lukoil, who accounted for 75 per cent of oil sold to India. Indian refiners have stopped buying oil from them but others can still continue to sell.

"Fitch Ratings believes US sanctions on two of Russia's largest crude oil producers, Rosneft and Lukoil, and the EU's ban on refined imports derived from Russian crude, are unlikely to have a significant effect on the refining margins or credit profiles of our rated Indian oil marketing companies (OMCs)," the rating agency said in a note.

Fitch said sanctions-related disruptions should suppress global demand for products linked to affected crude, widening refined product spreads and helping offset the loss of discounted Russian barrels.

Refiners still processing Russian crude could benefit from deeper discounts.

Abundant spare global crude capacity should also keep a lid on oil prices; Fitch forecasts Brent at USD 65 per cent in 2026, down from USD 70 in 2025.

Private refiners with significant EU exposure may face greater compliance risks, as tracing crude origins becomes more complex once grades are blended. Such firms may shift exports to alternative markets, adjust crude slates or invest in tighter traceability systems.

Indian OMCs posted EBITDA broadly in line with or slightly above expectations in H1 FY26, supported by softer crude and strong gasoil spreads. Gross refining margins averaged USD 6–7 per barrel, compared with USD 4.5–7 per barrel in FY25.

Fitch expects GRMs to hold near mid-cycle levels of around USD 6 per barrel in FY27, aided by firm domestic fuel demand and high utilisation rates.

A government-approved Rs 30,000 crore support package for Indian Oil, Bharat Petroleum and Hindustan Petroleum in 2Q FY26 will help offset losses from selling subsidised LPG below cost and strengthen liquidity.

Fitch said the Issuer Default Ratings of all three OMCs remain anchored by strong state linkages and a high likelihood of sovereign support if required. PTI ANZ MR