New Delhi: Indian energy stocks including ONGC, Indian Oil Corporation (IOCL), Bharat Petroleum Corporation (BPCL) and Indraprastha Gas (IGL) are in focus as disruptions in global oil and fuel markets push freight costs higher and tighten refined-product supplies. Brokerage Jefferies has highlighted the changing market dynamics, including a sharp rise in diesel refining margins and the possibility of restrictions on US diesel exports.
The developments come amid continued disruption in shipping through the Strait of Hormuz. According to Jefferies, commercial vessel movement through the strategic waterway has fallen to mid-single digits, with crossings declining 10% week-on-week over the past seven days. Freight rates have risen 7% over the same period and are now around eight times their levels at the beginning of the conflict.
The brokerage estimates that hiring an oil tanker now costs around $1 million a day, highlighting the pressure on global energy transportation costs.
Jefferies tracks ONGC, IOCL, BPCL and IGL
Jefferies maintains a Buy rating on ONGC, IOCL, BPCL and IGL, as well as Reliance Industries. The brokerage has a Hold rating on GAIL and Gujarat Energy, while HPCL, Petronet LNG and Mahanagar Gas have been rated Underperform.
These ratings represent Jefferies’ assessment and should not be interpreted as guaranteed future stock performance.
For the wider crude market, Jefferies estimates that physical crude is trading at about $119 a barrel, with a premium of roughly $16 a barrel over paper crude. Saudi Arabia has also restarted oil-tanker loading from Yanbu after restoring its East-West pipeline, providing an alternative route for exports.
However, the improvement in alternative supply routes has not removed the broader logistical pressures facing energy markets.
Diesel refining margins surge
Refining margins have become a key focus for oil companies. Jefferies said Singapore gross refining margins averaged $14.1 a barrel in the second quarter of FY27.
Current cracks for gasoline, diesel and aviation turbine fuel are around $37, $63 and $61 a barrel, respectively. The brokerage expects refining margins to remain elevated through FY27 as global supply chains take time to normalise.
The European diesel crack has climbed even further, reaching around $95 a barrel. A diesel crack represents the difference between the price of refined diesel and the crude oil used to produce it and is an important indicator of refinery profitability.
The sharp increase in the European diesel crack reflects tighter middle-distillate markets at a time when refinery and shipping disruptions are affecting global product flows.
Possible US diesel export restrictions add uncertainty
Another factor being monitored by the market is the possibility of the US restricting diesel exports.
Jefferies said the US is considering a potential diesel export ban, which could alter global product flows. Such a move could change the availability of diesel in international markets and influence regional refining margins.
For Indian refiners and fuel retailers, the impact would depend on how global product flows are redirected and how crude and refined-product prices evolve.
India has already used export-related measures to protect domestic fuel availability. The government increased the export levy on diesel to ₹55.50 per litre in April 2026 amid elevated crude prices and concerns over domestic supply.
High fuel prices pressure oil marketing companies
While higher refining margins can support refiners, the situation is more challenging for companies selling petrol and diesel domestically.
Jefferies estimates that Indian oil marketing companies are currently incurring losses of around ₹11 per litre on petrol and ₹16 per litre on diesel based on 15-day average pricing. These losses have, however, narrowed from the levels recorded in the first quarter of FY27.
The pressure arises because international fuel prices have increased while domestic retail fuel prices have not moved proportionately.
This creates a different impact across the energy sector. Refining companies can benefit from stronger product cracks, while companies exposed to domestic fuel marketing can face pressure when retail prices remain below levels implied by international market prices.
Natural gas and petrochemicals also in focus
The energy market disruption extends beyond crude oil and diesel.
European gas markets remain under pressure, with EU gas storage at 71%, compared with 83% a year earlier. Spot LNG prices are around $26 per million British thermal units, and Jefferies expects gas prices to remain elevated as winter approaches.
Petrochemical markets, meanwhile, have shown a different trend. Average margins for polyethylene, polypropylene and polyethylene terephthalate have risen 84% from the end of February.
The recovery has been supported by damage to major petrochemical facilities in Iran and Saudi Arabia, along with disruptions to naphtha exports from the Middle East. Jefferies said stronger petrochemical spreads are supporting the oil-to-chemicals profitability of Reliance Industries.
What investors are watching
The immediate focus for energy stocks is likely to remain on crude prices, refined-product cracks, shipping costs and the availability of diesel and other middle distillates.
For Indian oil marketing companies, the extent to which higher international fuel prices translate into domestic marketing losses will remain important. For upstream producers such as ONGC, the direction of crude prices is a key factor, while refiners will be influenced by the interaction between crude costs and refining margins.
The potential for a US diesel export restriction adds another variable because any change in global trade flows could affect regional product prices and refinery economics.
With shipping through the Strait of Hormuz still disrupted and tanker costs significantly elevated, Jefferies expects refining margins to remain strong through FY27. However, the impact is likely to differ across companies depending on their exposure to upstream production, refining, domestic fuel marketing, gas and petrochemicals.