New Delhi [India], January 6 : The oil and gas sector is expected to report a strong operational performance in the third quarter of FY26, with aggregate EBITDA projected to rise 17 per cent year-on-year, driven primarily by downstream and city gas segments, according to a sector preview note by Nuvama.
"We forecast O&G's Q3FY26E aggregate EBITDA shall jump 17 per cent YoY led by OMCs/RIL/CGDs, partially offset by ONGC and gas utilities," the report said.
Refining and marketing segments are likely to outperform, supported by a sharp improvement in gross refining margins (GRMs). The report highlighted that Singapore GRMs rose 21 per cent year-on-year, aided by a significant expansion in product cracks, with petrol cracks up over two times and diesel cracks up nearly 1.5 times from last year.
Fuel retail margins, however, remained under pressure despite elevated refining profitability. "Fuel retail margins remain elevated in Q3FY26, but moderated YoY on higher product cracks and INR depreciation," the note said. Diesel retail margins declined to INR 5.5 per litre, down 37 per cent year-on-year, while petrol retail margins stood at INR 10.7 per litre, a 17 per cent year-on-year decline.
Upstream performance is expected to remain weak during the quarter, weighed down by lower production and softer crude prices, the report noted, adding that the average crude price declined to around USD 63 per barrel during the quarter.
The city gas distribution segment is projected to post modest growth, with EBITDA expected to increase 5 per cent year-on-year, as stable margins help offset muted volume growth. "EBITDA +5% YoY on steady margins offsetting weak volume growth," the report stated, citing slower expansion in CNG demand and rising electric vehicle penetration in key urban markets.
Gas transmission and utility businesses are expected to see mixed performance. While LNG-related operations are projected to remain flat year-on-year, pipeline and petrochemical-linked earnings are likely to come under pressure due to weaker margins and higher operating costs.
Overall, the sector outlook for Q3FY26 reflects a divergence between downstream strength and upstream weakness, with refining gains and marketing margins partially offsetting declines in exploration, production, and gas utilities.
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