MUMBAI: The US sanctions on two of Russia’s largest crude oil producers--Rosneft and Lukoil--and the EU ban on refined imports derived from Russian crude, are unlikely to have a significant effect on the refining margins and credit profiles of the country’s oil marketing companies, according to international rating agency Fitch Ratings.
However, Fitch feels that the scale of the impact will depend on how long sanctions remain in place and how rigorously they are enforced.
Russian crude accounted about 33 percent of the country’s oil imports during January-August 2025. Its discounted price has provided support to OMCs’ margins and profitability.
"We generally expect the OMCs to comply with the sanctions, in line with their public statements. However, some refiners may continue to process Russian crude from unsanctioned sources," said Mohit Soni, director of corporate ratings for Apac at Fitch.
He also believes that the sanctions will dampen global demand for products tied to affected crude, leading to wider spreads for refined products. This should help mitigate downward pressure on refiners’ profitability as they use less discounted Russian crude, pay more for alternative supplies, and deal with more volatile shipping and insurance costs. Refiners that continue to process Russian crude may enjoy wider discounts on this portion of their crude use, he said.
"High spare capacity in the global crude market should help limit upward pressure on OMCs’ raw material costs, by dampening oil prices more broadly. We assume Brent crude prices will average $65/barrel in 2026, from $70/barrel in 2025," he added.
However, private refiners (Reliance and the Russian-owned Nayara) with significant EU export exposure could face additional sanctions-related risks, as proving compliance with the new sanctions regime could be challenging.
More importantly it is difficult to verify crude oil origins once different grades are blended before refining. Affected companies may opt to diversify sales to other markets, optimise their mix of different crude oil grades, or to invest in stronger compliance and traceability systems over the medium term.
OMCs’ operating margins in the first half of FY26 was broadly in line or slightly ahead of the agency’s expectations, as lower crude costs and robust gasoil spreads helped to support gross refining margins of $6/7/barrel, up from $4.5-/barrel in FY25.
Soni expects lower crude prices, coupled with rising domestic demand for refined products and very high refinery capacity utilisation to offset risks to GRMs from slowing global growth, supporting mid-cycle levels of around $6/barrel in FY27.
"We think marketing margins will remain steady, assuming that the authorities do not mandate lower retail prices or increase the excise duty on transport fuels," he added.