Those expecting a sharper margin hit say that as the company switches to other markets, including West Asia, it will lose out on the discount available on Russian oil, even as they have narrowed from over $10 a barrel in 2022 to about $2-3 a barrel in recent months. What could also upset the margin math, they say, is a surge in the price of crude oil from other sources due to the fresh sanctions on Russia—Brent rose by 5% to just under $66 a barrel on Thursday.
Reliance Industries did not respond to Mint’s request for a comment. An executive familiar with the company’s working said on the condition of anonymity that there would be no immediate impact on Reliance’s margins, as it holds 30-60 days of inventory.
In a statement on Friday, the company said it was assessing the implications. “We have noted the recent restrictions announced by the European Union, United Kingdom and the United States on crude oil imports from Russia and export of refined products to Europe,” a spokesperson said. “We will comply with the EU’s guidelines on the import of refined products into Europe.”
The company will adapt its refinery operations for compliance, the spokesperson said.
“As is customary in the industry, supply contracts evolve to reflect changing market and regulatory conditions. Reliance will address these conditions while maintaining the relationships with its suppliers. Reliance is confident that its time-tested, diversified crude sourcing strategy will continue to ensure stability and reliability in its refinery operations for meeting the domestic and export requirements, including to Europe,” the spokesperson added.
Shares of Reliance Industries closed 0.2% higher on the BSE on Friday at ₹1,451.45, compared to a 0.4% slide in benchmark Sensex. The stock was down 1.8% on Thursday when the US announced fresh sanctions on Rosneft and Lukoil, the two largest Russian oil producers.
Diesel crack boost
Those predicting only a marginal hit, if at all, are pointing at a surge in diesel cracks over the past 24 hours. The cracks widened by nearly a quarter to $29.49 a barrel intraday on Friday, as per Bloomberg data. The trading counter was open as of press time. Diesel cracks measure the difference between the price per barrel of crude oil and diesel, indicating how profitable it is for a company to refine crude into fuel. Higher diesel cracks could offset the impact of losing out on the discounts on Russian oil, they said.
Any impact on Reliance’s refining margin is crucial, as India’s most valuable company by market capitalization receives nearly three-fifths of its consolidated revenue and a third of its operating margins from its key oil-to-chemicals (O2C) business, which refines crude oil into transport fuel and other chemicals.
The US has put sanctions on Rosneft and Lukoil in a bid to dent Russia’s ability to fund its war in Ukraine. It has also threatened secondary sanctions on foreign financial institutions and companies that continue to do business with the two companies, which is expected to push Indian buyers to cut the purchase of Russian oil.
Every dollar counts
Reliance Industries does not detail its gross refining margin (GRM). However, the widening diesel cracks and discounts on Russian oil helped the company shore up its GRM to a three-year high of over $11 per barrel in October, as per JP Morgan estimates.
Analysts at JP Morgan estimate that every $1 rise in Reliance Industries’ GRM—its earnings from refining crude oil into transport fuels and chemicals—could boost its consolidated Ebitda by about 2% and consolidated profit by around 4% in FY27.
The firm did not clarify if the math works in reverse too; whether a $1 fall in GRM could shave off 2% from the company’s Ebitda and 4% from its profit.
One leading analyst estimates that the impact of halting the purchase of Russian oil on Reliance’s GRM would be negligible at just a few tens of cents.
“As the discount of Russian crude versus Dubai crude or to the Indian basket has narrowed substantially, the impact on Reliance’s GRM will be marginal,” said Sanjeev Prasad, managing director at Kotak Institutional Equities.
Another analyst estimates that the impact could be sharper, at $2.5 a barrel. Harshraj Aggarwal, executive vice president—institutional equity research at Yes Securities, said Reliance could lose out on up to $3 a barrel of discount on Russian oil. Moreover, in recent months, Russian oil has also been largely onboard vessels in the vicinity of Indian shores, available for delivery quickly, shaving off another $1 per barrel in shipping and insurance costs.
Halting purchase from Russian sources could result in Reliance losing out on this $4 per barrel. Considering this oil contributes just over two-fifths of Reliance’s input basket, that translates to about $2.5 impact on the company’s GRM, Aggarwal said.
Meanwhile, a third analyst, sees the hit even bigger, estimating the impact in the vicinity of $5 per barrel. This analysis has priced in a much higher discount for the Russian Urals oil compared to the benchmark Brent.
In September, Russian Urals oil was available at a discount of $5.13 per barrel to Brent in the spot market, as per Vaibhav Raghunandan, EU-Russia analyst at the Centre for Research on Energy and Clean Air (Crea), a Finland-based nonprofit think tank that researches on energy and air pollution trends.
While the exact terms between Reliance and the Russian producers (Lukoil & Rosneft) would be private, the discount available to the Indian company would be even higher compared to that in the spot market, given its 25-year deal with Rosneft to buy 500,000 barrels per day of crude oil, he said.
Considering a 5% rise in global crude prices, while keeping downstream fuel prices in the market constant, then RIL’s GRM could drop by $5 per barrel, Raghunandan said. He clarified Crea doesn’t track these margins and his estimate was based on third-party information.
Finding Alternatives
Reliance Industries has been the largest buyer of Russian crude oil in India, importing an estimated 600,000 barrels per day as recently as August, as per Bloomberg, citing Kpler data. That compares to the company’s total refining capacity of 1.4 million barrels a day at the world’s largest refinery in Jamnagar. In effect, about two-fifths of Reliance’s crude oil comes from Russia.
However, diversifying to other sources would not be difficult for Indian refiners, Crea’s Raghunandan said, pointing to the excess capacity with the Organization of the Petroleum Exporting Countries (OPEC).
OPEC countries had spare capacity of around 4.1 million barrels per day as of early 2025, as per a recent estimate from the International Energy Agency (IEA).
“This spare capacity provides OPEC with the flexibility to increase production to meet the supply gap caused by sanctions on Russia—and if fulfilled to its maximum will be twice the total gap India faces due to the shortfall in Russian crude based on 2024 imports,” Raghunandan said.
India’s public sector refineries have already significantly scaled back their Russian crude imports, he said, cutting as much as 38% from the previous month in September. These refineries’ procurement has been largely reliant on the quantum of discounts they get on Russian crude, he said.
Reliance has already purchased “millions of barrels of crude” from West Asia and the US following the sanctions on Rosneft and Lukoil, Bloomberg reported on Friday.