US LPG deal boosts India’s supply outlook, refiners set for strong quarter: HDFC Securities

India’s move to source 10% of India’s water by 2026 Import of Liquefied Petroleum Gas (LPG) from the United States According to HDFC Securities analyst Nilesh Ghuge, this is a move that supports the domestic LPG market. He described the agreement as “a positive step” that brings “stability” and greater integration with the global LPG ecosystem. He said the deal will benefit the overall market as well as public sector oil marketing companies.

recently Supply disrupted in MumbaiGhuge said the impact would be limited as supplies were restored quickly. Their estimates suggest that the two-week pause could reduce revenues by about 3.5% to 3.8%. But “they restored the supply only in less than a week,” he said, which limited the impact to a few days and mainly to the sale of compressed natural gas (CNG), while domestic piped natural gas (PNG) supplies continued to flow.

Ghuge keeps an eye on both oil marketing companies and refiners, including Reliance. He said net refiners like Mangalore Refinery and Petrochemicals Ltd (MRPL) and Chennai Petroleum Corporation Ltd (CPCL) should continue to benefit from strong fuel cracks. “They will continue to outperform this quarter as fuel oil cracks remain strong,” he said.

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For oil marketing companies, he said stable retail prices limit profits from higher cracks. Companies earn from refining but suffer losses on marketing margins. Still, low crude oil prices provide support. Brent is in the $62-$64 per barrel range compared to around $85 last year. Under-recovery on LPG has also declined from around ₹100 per cylinder in quarter two to around ₹40-₹50 in quarter three. The government will also release ₹30,000 crore of last year’s under-recovery over the next 12 months, he said, which will improve working capital and strengthen the balance sheet.

On standalone refiners, Ghuge said margins remain strong and earnings should be “very good” this quarter, with about six weeks still to go. He expects MRPL and CPCL to see higher profits in the near term.

However, looking to the future, he said the current high crack spread may not last long. Over the next year to 18 months, there will be “some pressure on diesel and gasoline cracks,” although “so far the momentum is in their favor.”

For the full interview, watch the accompanying video

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