Indian Oil Retailers Bleed ₹27 per Litre on Diesel as Crude Softens to $97: Jefferies

State-run fuel retailers are still bleeding cash at domestic petrol pumps.

Despite a sharp correction in crude benchmarks, Indian oil marketing companies face marketing under-recoveries of ₹12 per litre on petrol and ₹27 per litre on diesel, according to a detailed market assessment released by brokerage firm Jefferies. The deficits, calculated on a 15-day rolling average, mark a visible contraction from October when losses reached ₹22 per litre on petrol and ₹28 per litre on diesel. But the respite offers little comfort to balance sheets. Margins remain locked deep in negative territory.

Yet the underlying pressure on refiners refuses to abate. The relief follows a cooling of the Indian crude basket, which dropped to $97 per barrel after vaulting to $120 per barrel during the October price spike. Retail pump prices have remained frozen, leaving state refiners to swallow the difference directly at the retail counter.

Middle East Crude Inflows Rebound Against Stubborn Freight Rates

Supply bottlenecks that choked physical markets earlier this quarter have begun to untangle. Crude oil exports from the Middle East have clawed their way back to pre-war volumes, while Saudi Arabia pushed its October output to the highest level recorded in four years. Physical crude premiums, which surged during the initial geopolitical shock, have evaporated back to zero.

Cargo economics tell a grimmer story. Global tanker freight rates remain severely elevated, eating away at downstream processing economics. At the same time, regional diesel crack spreads—the margin refiners pocket by converting crude into automotive fuel—continue to hold above $80, choking downstream margins across Asian markets. The cost of hauling and converting barrels has cancelled out much of the headline crude relief.

Gas Inventories Shrink Ahead of Winter as Petrochemicals Rebound

Energy markets beyond transport fuels face parallel dislocations. Spot liquefied natural gas (LNG) softened 2% week-on-week to average $31 per million British thermal units (mmbtu). But Jefferies cautioned that Indian industrial affordability remains severely stretched at these procurement rates, limiting appetite among domestic city gas distributors and fertilizer plants.

European fuel stockpiles present another hazard for import pricing. Storage sites across the European Union sit at 72% capacity, down sharply from 82% during the identical period last year. Approaching winter chills threaten to burn through those cushions fast, which would spark aggressive global bidding wars for uncommitted LNG tankers.

A lone bright spot emerged in industrial feedstocks. Petrochemical margins widened over the past fortnight, supported by a steep drop in naphtha feedstock costs alongside firm domestic price quotes for polypropylene (PP) and polyethylene (PE). The resulting margin cushion provides downstream refiners a partial counterweight against retail pump losses.

Market Context: State-owned fuel retailers bear the full brunt of retail price inertia. With transport fuels making up the vast majority of OMC sales volume, sub-zero retail margins drain cash flows far faster than petrochemical units can replenish them. If crude basket pricing remains anchored near $100 alongside eighty-dollar diesel spreads, fuel retailers will head into the upcoming fiscal quarter seeking either domestic retail price adjustments or sovereign excise calibrations to stop downstream balance sheets from deteriorating further.