Indian oil marketing companies (OMCs) such as HPCL, BPCL, and IOCL are back in the spotlight as global refinery closures are expected to tighten the supply-demand balance, leading to improved gross refining margins (GRMs). According to ICICI Securities, as much as 21% of global refining capacity is currently at risk of closure, a shift that could significantly enhance the profitability of well-positioned refiners like India’s state-owned OMCs.
Citing a report by Wood Mackenzie, ICICI Securities notes that 101 refining sites, accounting for 18.4 million barrels per day (mb/d) — equivalent to 21% of the calendar year 2023 global refining capacity — are considered high-risk for closure under current market conditions. These shutdowns, if realized, are likely to reduce oversupply, tighten the market, and lift GRMs globally.
ICICI Securities added that despite concerns over China’s demand and macroeconomic uncertainties, these anticipated shutdowns could offer support to product margins over the next two years. The brokerage expects these closures to gradually start impacting available supply, which would be beneficial for Indian refiners given their efficient cost structures and stronger balance sheets.
The report further highlights that HPCL, BPCL, and IOCL are preferred in the current environment. In addition to improved refining dynamics, rising domestic fuel retail margins—if not fully offset by inventory losses—could also help OMCs outperform global peers.
Moreover, a measured policy response from the Indian government toward fuel pricing has added comfort to the sector. “We remain positive on OMCs in the current environment,” the report stated, underlining HPCL, BPCL, and IOCL as top picks.
Disclaimer: The above information is based on brokerage insights and is not investment advice. Please consult your financial advisor before making any investment decisions.
