Q2FY26 profits surge for PSU refiners despite cutting down on Russian crude

New Delhi: Profits at state-run refiners surged in the July-September quarter even as their reliance on Russian oil plunged, highlighting that earnings were driven more by global crude and fuel price dynamics than by discounted Russian barrels.

The combined profit of Indian Oil, BPCL and HPCL jumped 457% year-on-year in Q2 to ₹17,882 crore, buoyed by lower crude prices and strong refining and marketing margins. This came despite the three companies-along with smaller peer MRPL-importing 40% less Russian crude on average in Q2 than a year earlier, according to Kpler, a global real-time data and analytics provider.

MRPL also swung to a profit in the second quarter after a loss in the same period last year.

Russian crude accounted for 24% of state refiners' crude slate in the second quarter, down from 40% a year ago, per Kpler. The discounts remained roughly the same in both periods, according to industry executives. Indian Oil, the country's largest refiner, said Russian oil made up only 19% of its crude basket in Q2. HPCL chairman Vikas Kaushal said Russian crude contributed just 5% of HPCL's inputs because it was "not economical to run on our refinery".

What powered the quarter's exceptional earnings, executives and analysts said, was the sharp drop in global crude prices and strong fuel crack spreads-not Russian discounts. While cheaper barrels help, their contribution is marginal, they said. "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 said.

Benchmark Brent crude averaged $69 per barrel in the July-September quarter, down 14% from $80 a year earlier, lowering feedstock costs. Fuel cracks surged: diesel was up 37% to $18.7 per barrel, petrol up 24% to $8.4, and jet fuel up 22% to $8.4. These dynamics boosted gross refining margins-Indian Oil reported a GRM of $10.6 per barrel, compared with $1.59 a year ago. Indian Oil's refining margins also benefited from small inventory gains this quarter versus large losses a year earlier.

Diesel cracks strengthened due to low inventories in Asia and Europe and reduced Russian diesel exports after Ukrainian drone attacks on refineries. Petrol cracks improved on lower Chinese exports and tighter inventories in Asia, while jet fuel cracks were supported by strong demand.

The US and European Union are using sanctions to choke off India's imports of Russian crude. Washington has sanctioned Rosneft and Lukoil-Russia's two biggest oil exporters-forcing Indian refiners to scale back purchases. Both state-run and private refiners have already cut reliance on Russia and are increasingly replacing those barrels with supplies from West Asia, the US, and other sources.