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India’s demand for petroleum products such as petrol, diesel and LPG is expected to rise by three to four per cent in the current financial year ending on March 31, 2025, according to a Fitch Ratings report. 

The growth is driven by rising consumer, industrial and infrastructure demand, the rating agency said in the report.

For India’s oil marketing companies (OMCs), refinery margins are expected to fall below their mid-cycle levels in FY25 amid lower product cracks, regional oversupply, and lower benefits from price differences between crude varieties, the report states.

However, marketing margins would be better than FY 24 due to lower Brent crude oil prices in the current financial year, the report states.

“This will mitigate the pressures from lower refining margins for the oil marketing companies, although pure refiners like HPCL-Mittal Energy Limited’s (HMEL, BB+/Stable) will face greater pressure on profitability. We expect refining margins to recover to their mid-cycle levels in FY26, as the regional oversupply eases and Brent crude oil prices fall in line with Fitch’s assumption, while we project marketing margins to remain supportive. HMEL’s low rating headroom in FY25 will improve in FY26 due to a gradual normalisation in refining margins,” the report said.

For the upstream companies such as Oil and Natural Gas Corporation Limited (ONGC) and Oil India Limited (OIL), profits are expected to dip due to subdued production and lower crude oil prices. Fitch Ratings said domestic prices for gas produced from old fields are expected to continue to be capped at $6.5/MMBTU in 2HFY25, as they are determined by a formula that benchmarks prices to 10 per cent of crude prices.

India’s oil and gas production is expected to be broadly flat in FY25. The report said India’s crude oil production would fall by two to three per cent in FY25, as upstream companies struggle to arrest the natural output decline at ageing fields through technology investments to raise recovery and tap isolated reservoirs.

However, production should grow by low single-digit percentages in FY26, as production increases at ONGC’s eastern offshore KG Basin, and at privately owned fields, it added.

The country’s crude oil import dependency would continue to rise in the near term, due to the growth in demand for petroleum products not being matched by a rise in domestic crude oil production.