Oil profits surge: State refiners' Q2 earnings jump 457% despite lower Russian imports; global margins lift gains

Profits at India’s state-run oil refiners soared in the July–September quarter even as their dependence on discounted Russian crude dropped sharply, showing that earnings were fuelled more by global price movements than by cheap Russian supplies.

According to ET, the combined profit of Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL), and Hindustan Petroleum Corporation (HPCL) surged 457% year-on-year to Rs 17,882 crore in the second quarter.

The jump was driven by lower crude oil prices and strong refining and marketing margins.

Mangalore Refinery and Petrochemicals Ltd (MRPL) also returned to profit after posting a loss during the same period last year.

Data from analytics firm Kpler showed that IOC, BPCL, HPCL, and MRPL together imported 40% less Russian crude than a year earlier. Russian oil accounted for just 24% of the state refiners’ total crude intake in Q2, down from 40% a year ago.

The discounts on Russian barrels remained largely unchanged.

IOC said Russian crude made up only 19% of its refining mix, while HPCL chairman Vikas Kaushal was quoted by ET as saying that the share was just 5% for HPCL, as “it was not economical to run on our refinery.”

Executives emphasised that the profit boost was mainly due to favourable global conditions, not Russian discounts. “Ultimately, global dynamics such as benchmark crude prices and fuel cracks matter far more than the discounts on the relatively small share of Russian crude we process,” a state refinery executive was quoted as saying.

Brent crude averaged $69 a barrel in the July–September quarter, 14% lower than the $80 average a year earlier.

This drop reduced feedstock costs, while product cracks surged.

Diesel cracks climbed 37% to $18.7 per barrel, petrol rose 24% to $8.4, and jet fuel gained 22% to $8.4. These shifts lifted refining margins significantly—IOC reported a gross refining margin (GRM) of $10.6 per barrel, up from $1.59 a year earlier, also aided by inventory gains.

The strengthening of diesel cracks was attributed to low inventories in Asia and Europe and reduced Russian exports following Ukrainian drone attacks on refineries.

Petrol and jet fuel margins also improved due to tighter supplies and strong demand.

Meanwhile, sanctions from the United States and the European Union targeting Russian oil majors Rosneft and Lukoil have forced Indian refiners to scale back imports from Moscow. Both state-run and private refiners have begun replacing Russian barrels with crude sourced from West Asia, the US and other markets.