Nifty Oil & Gas gains 3% in one month: Here’s what’s fuelling the momentum

The oil and gas sector has delivered notable gains over the past six months, despite ongoing trade tensions between the US and India.

In August, US President Donald Trump had imposed a secondary 25% tariff on Indian goods, doubling the existing “reciprocal” duties as a penalty for India’s continued purchases of Russian crude.

India, the world’s third-largest oil consumer, depends on imports for about 88% of its crude requirements.

Since 2022, discounted Russian oil has helped India save billions of dollars in foreign exchange, with Russia now supplying over a third of India’s crude imports—up from less than 2% before the war in Ukraine.

Although crude imports in July and August were lower compared to earlier months, industry experts attribute the decline more to narrowing price discounts rather than direct US pressure.

The NIFTY Oil & Gas index gained 2.6% over the past month and surged 2.8% in the last week, while rising 12.5% over the past six months. On Wednesday, the index hit an intraday high of 11,320.20, advancing 0.89%. At the time of writing, it was up 0.47%.

On the index, Castrol India was the biggest contributor, gaining 1.34%, followed by BPCL (1.18%), Oil India (1.08%), Petronet LNG (0.66%), Indian Oil Corporation (0.57%) and Reliance Industries (0.52%). Further, ONGC, HPCL and Adani Total Gas also rose 0.46%, 0.41% and 0.29%, respectively.

However, Aegis Logistics (-0.43%), Gujarat State Petronet (-0.41%), GAIL (-0.30%), Mahanagar Gas (-0.29%), and Indraprastha Gas (-0.25%) were the top losing stocks in the Nifty Oil and Gas sector.

Here is what's fuelling the sector:

Oil prices eased slightly on Wednesday after climbing more than 1% in the previous session, with ongoing geopolitical concerns continuing to support the market. Investors are now looking to the upcoming US Federal Reserve rate decision for further direction.

Crude oil futures on Wednesday declined ₹37 to ₹5,644 per barrel, as participants trimmed positions amid weak demand in the spot market. On the Multi-Commodity Exchange, crude oil for October delivery fell ₹37, or 0.65%, to ₹5,644 per barrel in 9,862 lots.

Analysts attributed the decline to participants offloading holdings due to subdued spot market demand. Globally, West Texas Intermediate (WTI) crude was trading 0.12% lower at $64.44 per barrel, while Brent crude fell 0.15% to $68.37 per barrel in New York.

Meanwhile, easing oil prices are beneficial for oil marketing companies such as IOCL, HPCL, and BPCL, as lower crude costs improve their refining margins. However, the trend is generally negative for oil-producing companies involved in exploration, such as Oil India and ONGC, as lower prices reduce their revenue from crude production. Among private players, Reliance Industries Limited (RIL) is also impacted.

HSBC Global Investment Research in a report dated September 15 said that in the last six months Indian oil marketing companies (OMCs) have witnessed volatility in refining margins, potential risk in the US urging India to reduce its intake of Russian oil and depreciation of INR against USD.

The Indian government has been backing OMCs by supporting decisions (even in August 2025, India imported 1.3 mbpd) which are in the best commercial interests of these companies and promising to pay LPG under-recovery incurred in FY24, the report added.

This resulted in OMC stocks rising 14-23% as compared to the NIFTY50, up 12% in the last 6 months, HSBC Research said.

“While refining margins expanded in the interim and then contracted, and INR depreciation ate away some of the marketing margins, combined margins have stood steady at USD22-25/bbl, which is much higher than our and the street’s full-year estimates. This leaves a comfortable margin of safety for these companies, which historically have been associated with highly volatile earnings,” the report explained.

In August 2025, auto fuel demand sustained its growth momentum, rising 2.6% year-on-year (YoY). Gasoline demand showed strong growth of 5.5% YoY, while diesel demand increased by 1.2% YoY.

However, aviation turbine fuel (ATF) demand remained in decline for the second consecutive month, falling 2.9% YoY after a 2.3% drop in July.

“With recent improvements in air traffic, we expect the ATF demand decline to reverse soon. Overall, the 2.6% YoY increase in fuel demand was supported by a significant 47.1% YoY surge in bitumen consumption. Oil Marketing Companies (OMCs) continue to expand their footprint, with new outlets growing 8% YoY in July 2025. Additionally, they are accelerating the addition of EV outlets, which now make up 30% of their total network,” HSBC noted.

Indian authorities have cleared EU-sanctioned Nayara Energy to deploy four foreign-flagged vessels for moving petrol and diesel along the country’s coast, easing domestic supply disruptions. However, the private refiner’s non-Russian overseas trade remains stalled due to the unavailability of banking channels.

The Directorate General of Shipping approved the use of four foreign-flagged ships for the coastal movement of Nayara’s fuel output, two of which are already operating, while a third will join soon and a fourth in the coming days, PTI reported citing officials.

The move restores shipments from Nayara’s 20-million-tonne-a-year Vadinar refinery in Gujarat, which accounts for about 8% of India’s fuel output. Nayara exports about 25–30% of its output, but sales abroad have been suspended as banks refuse to clear payments.

Hindustan Petroleum Corporation Ltd (HPCL), which relies on Nayara to meet retail demand beyond its own refinery output, is among the main beneficiaries of the restored shipping arrangement. The resumption comes ahead of the festival season, when fuel demand typically rises.

India’s imports of Russian oil held firm in early September, data shows, suggesting that US President Donald Trump’s public criticism and fresh tariffs on Indian goods have yet to alter New Delhi’s crude buying patterns.

India imported about 1.73 million barrels per day (bpd) of Russian crude during September 1-16, reported The Indian Express, citing vessel-tracking data from global real-time analytics provider Kpler. That was higher than the 1.66 million bpd imported in August and 1.59 million bpd in July, when Trump began targeting New Delhi over its reliance on Moscow’s oil.

Crude loadings at Russian ports between September 1 and 16 stood at 1.22 million bpd, though industry sources said actual volumes could reach 1.6 million bpd, as several tankers currently marked for Egypt’s Port Said often redirect to India after transiting the Suez Canal, according to the report.