The oil and gas sector is likely to deliver a robust operational performance in the third quarter of FY26, with aggregate EBITDA expected to grow 17 per cent year-on-year, largely driven by strength in downstream operations and the city gas segment, according to a sector preview by Nuvama.
The report estimates that Q3FY26 aggregate EBITDA for the sector will rise 17 per cent on-year, led by oil marketing companies, Reliance Industries and city gas distributors, although gains are expected to be partly offset by weaker performance from ONGC and gas utilities.
Refining and marketing businesses are set to lead the outperformance, supported by a sharp recovery in gross refining margins. Nuvama noted that Singapore GRMs increased 21 per cent year-on-year, aided by a significant expansion in product cracks, with petrol cracks more than doubling and diesel cracks rising nearly 1.5 times compared with the same period last year.
Despite higher refining profitability, fuel retail margins remained under pressure. While margins stayed elevated during the quarter, they moderated on a year-on-year basis due to higher product cracks and depreciation of the rupee. Diesel retail margins fell 37 per cent year-on-year to ₹5.5 per litre, while petrol margins declined 17 per cent to ₹10.7 per litre.
Upstream companies are expected to continue facing challenges in the quarter, impacted by lower production levels and softer crude oil prices. The report pointed out that average crude prices eased to around $63 per barrel during Q3FY26.
The city gas distribution segment is projected to register modest growth, with EBITDA likely to rise 5 per cent year-on-year. Stable margins are expected to cushion the impact of muted volume growth, as CNG demand growth slows and electric vehicle adoption increases in major urban markets.
Gas transmission and utility companies are expected to report mixed results. LNG-related operations are forecast to remain flat year-on-year, while pipeline and petrochemical-linked earnings may face pressure from weaker margins and higher operating costs.
Overall, the sector’s Q3FY26 outlook highlights a clear contrast between strong downstream performance and continued weakness in upstream businesses, with gains from refining and marketing partially offsetting declines in exploration, production and gas utilities.
