The Indian oil and gas sector is likely to see strong growth through the fiscal year 2026 and 2027, despite significant volatility faced by the oil and gas market last month, said a research note by Systematix Institutional Equities.
India’s oil & gas sector covered companies are likely to deliver average sales, EBITDA, and PAT growth of 6%, 12.9%, and 13.3% year-on-year for FY26E, and 7.8%, 9%, and 10.1% year-on-year for FY27E, respectively. Systematix suggests that top investment picks include Reliance Industries Ltd (RIL), GAIL India Ltd (GAIL), Mahanagar Gas Ltd (MGL), and Gulf Oil Lubricants India Ltd (GOLI).
According to the research, the market suffered from significant volatility with declining crude prices countered by a robust rebound in refining margins.
Last month, Brent Crude prices fell by 22.9% year-on-year and 3.8% month-on-month in May 2025, influenced by increased OPEC supply from nations like Saudi Arabia and the UAE. Additionally, Global liquid demand also saw a sharp drop before a slight recovery. The lower crude prices contributed to a decline in US rig counts, reflecting cautious upstream investment.
Contrary to this, the benchmark Gross Refining Margin (GRM) of companies surged by 85% month-on-month and 121% year-on-year, averaging $6.4/bbl. This significant improvement stemmed from lower crude input costs and enhanced product cracks across gasoline, gasoil, jet, kero, and naphtha segments, all showing strong month-on-month improvements.
What Else?
Furthermore, Natural gas prices presented mixed trends. Henry Hub prices in the US corrected sharply by 31.8% since January 2025 due to oversupply and mild weather. Conversely, Asian spot LNG (Japan Korea Marker) prices rose 6.7% year-on-year to $11.9/mmbtu, driven by regional demand.
In the fourth quarter of FY25, the aggregate earnings for the oil and gas sector saw a slight year-on-year decline but a sequential increase, with gas and City Gas Distribution (CGD) companies generally reporting revenues above estimates. While EBITDA/scm for CGD companies declined year-on-year, they showed sequential rebounds driven by price hikes and favourable gas price mix.
