Fuel marketing losses at state-run oil marketing companies (OMCs) narrowed sharply in the September quarter, supported by lower crude oil prices and the full impact of retail fuel price increases, according to Emkay Research. The improvement was highlighted in the research firm’s oil and gas sector preview for Q2FY27.

Petrol marketing margins, excluding the impact of the windfall levy, improved to Rs. 2.9 per litre in Q2FY27 from a loss of Rs. 12 per litre in the previous quarter. Diesel marketing losses also narrowed to Rs. 16.7 per litre from Rs. 32 per litre, although diesel sales remained loss-making during the quarter.

The improvement followed significant pressure on OMC fuel marketing margins in the June quarter, when higher crude prices affected profitability. Losses on domestic liquefied petroleum gas (LPG) sales also declined, with under-recoveries narrowing to around Rs. 290 per cylinder during the quarter.

Aviation turbine fuel (ATF) margins improved after regular price increases were implemented from July. Refiners also received support from inventory gains during the quarter, as Brent crude averaged around USD 97 per barrel, down 6 per cent from the previous quarter.

Crude prices, however, ended the quarter at around USD 120 per barrel, sharply higher than approximately USD 72 per barrel at the end of Q1. Emkay Research said the late-quarter increase could result in significant inventory gains for some refiners. The firm expects the improvement in fuel marketing margins, lower LPG under-recoveries and stronger ATF margins to support OMC earnings in Q2FY27.