oil and gas: Despite upstream challenges, the industry is expected to do well in Q3FY26 Report
oil and gas: According to a sector preview note by Nuvama, the oil and gas industry is anticipated to have a solid operational performance in the third quarter of FY26, with aggregate EBITDA predicted to increase 17% year over year, driven principally by the downstream and city gas sectors.According to the research, “O&G’s Q3FY26E aggregate EBITDA will jump 17% YoY, led by OMCs/RIL/CGDs, partially offset by ONGC and gas utilities.”
With a notable increase in gross refining margins (GRMs), the marketing and refining divisions are probably going to do well. According to the research, Singapore’s GRMs increased by 21% year over year due to a notable increase in product cracks, with petrol cracks increasing by more than two times and diesel cracks increasing by over 1.5 times from the previous year.
However, despite increased refining profitability, pressure continued to mount on fuel retail margins. “Fuel retail margins remain elevated in Q3FY26, but moderated YoY on higher product cracks and INR depreciation,” said the report. Petrol retail margins were INR 10.7 per litre, down 17% year over year, while diesel retail margins dropped to INR 5.5 per litre, down 37% year over year.
According to the analysis, reduced output and weaker crude prices are projected to continue to hinder upstream profitability throughout the quarter. The average oil price dropped to around USD 63 per barrel during that time.
The city gas distribution industry is anticipated to expand modestly, with EBITDA rising 5% annually as steady margins help counteract slower volume growth. “EBITDA +5% YoY on steady margins offsetting weak volume growth,” the report said, pointing to growing electric car adoption in important metropolitan regions and slower increase in CNG demand.
Performance in the utilities and gas transmission industries is anticipated to be uneven. Weaker margins and increased operating expenses are expected to put pressure on pipeline and petrochemical-related profits, while LNG-related activities are expected to be steady year over year.
Overall, the sector estimate for Q3FY26 shows a split between upstream weakness and downstream growth, with decreases in exploration, production, and gas utilities somewhat offset by refining increases and marketing profits.