Global brokerage Nomura sees potential in Indian Oil Marketing Companies (OMCs) like IOC and BPCL, betting on a global oil surplus by 2027 to boost long-term margins. Despite recent stock declines of 15-25%, integrated marketing margins remain healthy. The brokerage also highlights Reliance Industries for its superior refining capacity and ability to navigate market changes.
Global brokerage Nomura has issued a positive outlook on India's Oil Marketing Companies (OMCs), specifically naming Indian Oil Corporation (IOC) and Bharat Petroleum Corporation (BPCL) as key entities to watch. This comes at a time when the sector has faced a challenging year, with stock prices of major OMCs retracting between 15% and 25% year-to-date as of August 2026. Despite this decline, the brokerage believes the long-term outlook for the sector is supported by stabilizing energy costs.
The investment thesis relies on the expectation that global oil markets will shift toward a supply surplus by 2027. According to International Energy Agency (IEA) forecasts cited by Nomura, this expected surplus should help normalize crude oil prices. Currently, OMCs are reporting healthy integrated marketing margins, estimated between $8 and $13 per barrel, even after accounting for the costs associated with selling liquefied petroleum gas (LPG) at regulated prices.
Reliance Industries occupies a distinct position in this analysis. Nomura highlights that Reliance is well-placed to benefit from the current refining landscape. The company operates a large special economic zone (SEZ) refinery which accounts for approximately 52% of its total refining capacity. This setup allows the company to realize market-based refining margins without the burden of certain additional excise duties that apply to domestic-focused players. This structural advantage allows Reliance to maintain strong profitability even while global refining margins face pressure.
While the brokerage remains optimistic, there are significant risks that investors should monitor. Geopolitical instability in West Asia, particularly threats to shipping routes like the Strait of Hormuz, continues to drive volatility in Brent crude prices, which were trading around $86 per barrel as of late August 2026. Supply disruptions from such conflicts could push prices higher, squeezing marketing margins if retail fuel prices do not adjust accordingly.
Furthermore, domestic policy remains a critical factor. A potential reversal of the government's ₹10 per litre excise duty cut on petrol and diesel remains a major risk for the profitability of OMCs. If the government decides to adjust duties or if retail pricing policies do not keep pace with global crude costs, it could lead to 'under-recoveries,' where the companies effectively sell fuel at a loss. Investors tracking this sector may continue to watch crude price trends, government fuel pricing policy, and margin sustainability in the coming quarterly results.