The Indian oil and gas sector is poised for strong growth through fiscal years 2026 and 2027, according to a research note from Systematix Institutional Equities, despite facing significant market volatility last month.
The report projects that companies in India’s oil and gas industry will achieve average year-on-year growth in sales, EBITDA, and PAT of 6%, 12.9%, and 13.3%, respectively, for FY26. For FY27, these growth rates are expected to rise to 7.8%, 9%, and 10.1%. The research highlights Reliance Industries Ltd (RIL), GAIL India Ltd (GAIL), Mahanagar Gas Ltd (MGL), and Gulf Oil Lubricants India Ltd (CGOLI) as top investment picks.
The sector experienced notable fluctuations recently, with declining crude oil prices offset by a sharp rebound in refining margins. In May 2025, Brent crude prices dropped 22.9% year-on-year and 3.8% month-on-month, driven largely by increased supply from OPEC nations including Saudi Arabia and the UAE. Global liquid fuel demand also contracted sharply before showing signs of recovery.
Lower crude prices led to a decline in US rig counts, signaling cautious upstream investment activity. Conversely, benchmark Gross Refining Margins (GRM) surged dramatically, rising 85% month-on-month and 121% year-on-year, averaging USD 6.4 per barrel. This improvement was attributed to reduced crude input costs combined with stronger product cracks across gasoline, gasoil, jet fuel, kerosene, and naphtha segments, all exhibiting solid month-on-month gains.
Natural gas prices displayed mixed trends. US Henry Hub prices fell sharply by 31.8% since January 2025 due to oversupply and mild weather conditions. In contrast, Asian spot LNG prices, as measured by the Japan Korea Marker, increased 6.7% year-on-year to USD 11.9 per million British thermal units (mmbtu), driven by robust regional demand.
During the fourth quarter of FY25, the oil and gas sector’s aggregate earnings saw a slight year-on-year decline but posted a sequential increase. Gas and City Gas Distribution (CGD) companies generally reported revenues above estimates. While EBITDA per standard cubic meter (scm) for CGD companies declined year-on-year, a sequential rebound was observed, supported by price increases and favorable gas price mixes.
