Jefferies adopts a cautious stance on several Indian oil and gas companies despite signalling ongoing tightness in global energy markets, driven by shipping disruptions, geopolitical tensions, and policy risks, amid sector restructuring and margin fluctuations.
Jefferies has turned more cautious on several Indian oil and gas names even as it argues that global energy markets remain tight, with disruption through the Strait of Hormuz, firmer tanker rates and stronger physical crude premiums all feeding into a more complicated backdrop for refiners and explorers. The brokerage’s latest note comes as global oil trade continues to face shipping strain, while refining and petrochemical margins have improved enough to keep the sector in focus for investors. Jefferies’ earlier research has also argued that the industry is in the midst of a broader consolidation cycle, with large-scale deals and strategic investment reshaping the sector after years of volatility.
According to Jefferies, commercial shipping through the Strait of Hormuz has fallen to mid-single-digit levels after a week-on-week drop, while Saudi Arabia has restarted tanker loading from its Yanbu port after restoring the East-West pipeline. The brokerage said freight rates have jumped sharply and are now many times higher than before the conflict, reflecting persistent risk to oil transport routes. Jefferies has also pointed to attacks on Russian refining capacity as a factor tightening middle distillates markets, with supply normalisation expected to take time.
For Indian refiners, the picture is mixed. Jefferies said Singapore gross refining margins averaged $14.1 a barrel in the second quarter of FY27, while cracks for gasoline, diesel and aviation fuel remain elevated. That has helped support margins, but Indian oil marketing companies are still losing money on retail fuel sales on the brokerage’s estimates, with losses of about Rs 11 a litre on petrol and Rs 16 a litre on diesel using 15-day average pricing. Jefferies also flagged new policy risk after US legislation gave the president power to impose tariffs of up to 100% on major buyers of Russian crude, including India and China, potentially complicating sourcing decisions for refiners.
The firm’s stock preferences reflect those cross-currents. It has buy ratings on ONGC, Indian Oil, Bharat Petroleum and Indraprastha Gas, while keeping GAIL and Gujarat State Petronet at hold and cutting HPCL, Petronet LNG and Mahanagar Gas to underperform. Based on Jefferies’ targets and the October 5 closing prices cited in the note, Gujarat State Petronet shows the biggest implied upside at 78.76%, although the stock is still rated hold. Bharat Petroleum, Indian Oil and ONGC each have upside of about 38%, while Indraprastha Gas has a smaller but still positive target gap. Jefferies also said improving petrochemical margins are aiding Reliance Industries’ oil-to-chemicals division, and that European gas storage levels point to a firm gas price environment as winter approaches.
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