New Delhi: EBITDA for the oil and gas sector is expected to rise 21.1 per cent year-on-year and 6.9 per cent quarter-on-quarter in Q3FY26, even as upstream companies face pressure from lower crude and gas realisations, according to a YES Securities preview. The headline growth masks a sharp divergence within the sector, with refiners and oil marketing companies (OMCs) emerging as the key drivers, while upstream earnings weaken.
Why crude prices matter this quarter?
During Q3FY26, Brent crude averaged $63.1 per barrel, down $10.9 year-on-year and $5.0 quarter-on-quarter. This decline directly impacts upstream producers, whose earnings depend on crude and gas realisations. At the same time, lower crude prices tend to support refining margins when product cracks remain firm, shifting the earnings balance towards refiners and OMCs.
Upstream: Lower realisations offset volumes
Upstream performance is expected to be weak. ONGC’s oil production is estimated to decline about 1 per cent year-on-year, with gas production remaining flat. Oil India’s oil output could fall 3.4 per cent, though gas production is expected to rise 1 per cent. Despite relatively stable volumes, net crude realszations are expected to decline for both companies due to lower crude and gas prices, leading to a sharp drop in upstream earnings, partially cushioned by dividend income from investments.
Refiners and OMCs: Margins take centre stage
Refining economics improved during the quarter. The Singapore gross refining margin averaged $4.9 per barrel, higher by $0.8 quarter-on-quarter, supported by stronger cracks for gasoil, gasoline and aviation turbine fuel. Petroleum product consumption in India is expected to rise 2.3 per cent year-on-year and 10.2 per cent quarter-on-quarter.
Gross marketing margins for petrol and diesel averaged ₹7.38 per litre and ₹5.25 per litre, respectively. OMCs are expected to report strong year-on-year improvement in earnings, driven by better refining margins, improving throughput and recovery of LPG subsidy burden from November 2025, though forex depreciation may weigh on reported numbers.
Standalone refiners such as CPCL and MRPL are expected to benefit from elevated product cracks. Reliance Industries is expected to report stronger oil-to-chemicals performance on higher refining margins, alongside improved telecom metrics and stable retail margins.
Gas utilities and CGDs: Mixed signals
Gas utilities are expected to remain subdued. Petronet LNG volumes are likely to decline 2.2 per cent on both year-on-year and quarter-on-quarter basis, while GAIL’s performance may improve marginally due to gas transmission and trading. City gas distribution companies are expected to see sequential improvement in EBITDA spreads, even as volumes show mixed trends due to winter demand patterns and regional factors.
The big picture
Q3FY26 underlines a familiar oil and gas cycle: when crude prices fall, upstream earnings weaken, but refiners and marketers gain from stronger margins. The result is a sector-level earnings recovery driven less by volumes and more by where each company sits in the value chain.
