Jefferies has issued Buy ratings on ONGC, IOCL, BPCL and IGL, while Reliance Industries is also rated Buy, according to the latest analysis from the brokerage. The firm maintains Hold ratings on GAIL and Gujarat Energy, while HPCL, Petronet LNG and Mahanagar Gas carry Underperform ratings. This comes as Indian energy stocks like ONGC, IGL, and Reliance gain focus amid Middle East conflict disruptions that continue to disrupt shipping, lift freight costs and tighten global fuel markets.
Commercial vessel movement through the Strait of Hormuz has fallen to mid-single digits, with crossings down 10% week-on-week over the past seven days, according to Jefferies. Freight rates rose 7% week-on-week and are now around eight times higher than at the start of the conflict, with the cost of hiring an oil tanker climbing to around $1 million a day. The brokerage estimates the premium of physical crude over paper crude at around $16 a barrel, with physical crude trading at about $119 a barrel. Saudi Arabia has restarted oil-tanker loading from Yanbu after restoring its East-West pipeline, providing an alternative export route.
Jefferies reports that Singapore gross refining margins averaged $14.1 a barrel in Q2FY27, while current gasoline, diesel and aviation-fuel cracks stand at around $37, $63 and $61 a barrel, respectively. The brokerage expects refining margins to remain elevated through FY27 as supply chains take time to normalise. The European diesel crack has climbed to about $95 a barrel, adding to the strength in middle-distillate markets. However, for Indian oil marketing companies, higher international fuel prices are creating challenges, with Jefferies estimating OMCs are currently making losses of around ₹11 per litre on petrol and ₹16 per litre on diesel based on 15-day average pricing.
Europe's gas market is under pressure with EU gas storage at 71%, versus 83% a year earlier, while spot LNG prices are around $26 per mmbtu, according to Jefferies. The brokerage expects gas prices to remain elevated as winter approaches. Meanwhile, petrochemical spreads have rebounded sharply, with average PE, PP and PET margins 84% higher than at the end of February, helped by damage to major petrochemical facilities in Iran and Saudi Arabia and disrupted Middle East naphtha exports. The stronger spreads are supporting O2C profitability for Reliance Industries.
Morgan Stanley's assessment of India's energy sector continues to highlight resilient demand drivers, with the brokerage identifying six preferred stocks across India's energy and power sectors including HPCL, Bharat Petroleum Corporation, Oil And Natural Gas Corporation, Oil India, Adani Power and Adani Energy Solutions Ltd. The firm expects Asian gross refining margins to remain above mid-cycle levels and estimates India will account for 192,000 barrels per day of incremental refined-product demand between 2025 and 2029. Morgan Stanley also points to government support of approximately $16.9 billion across offshore exploration and domestic energy production initiatives.
