What rising crude and aluminium prices mean for India

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OMCs squeezed; upstream explorers stand to gain

Geopolitical tensions in West Asia are the single biggest variable pushing crude prices higher, according to Bharat Subramanian, VP–Equity Research at BofA Securities. A lasting truce could ease prices, but without one, the rally is likely to continue.

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For India’s oil marketing companies (OMCs), the pain is twofold. Higher crude directly compresses petrol and diesel marketing margins, while LPG, a subsidised product, is generating losses exceeding ₹650 per cylinder. The March 2026 excise duty cuts and subsequent auto-fuel price hikes have provided some cushion, but currency depreciation is adding fresh pressure.

“Higher crude prices and currency depreciation — these are the two key points to watch out for for oil marketing companies right now,” says Subramanian.

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Analysts prefer OMCs with a lower net marketing sales-to-refining throughput ratio as a buffer against margin stress. On the flip side, upstream exploration and production companies look better positioned, higher crude translates directly into stronger realisations.

Deep-water push and the windfall tax question

A major theme developing in India’s upstream sector is energy security, with growing government focus on deep-water and ultra-deep-water exploration. Last year’s amendment to the ORD Act has improved regulatory stability, potentially attracting global oil majors with deep-water expertise alongside domestic anchor investors.

One risk the market is watching: a potential windfall tax. The last imposition capped upstream realisations at $75 per barrel. While analysts flag it as a known risk, the decision ultimately rests with the government.

Aluminium bullish into 2027; non-ferrous preferred over steel

Aluminium prices, already at four-year highs, could peak around the second quarter of next calendar year according to BofA’s global commodities team. The drivers are supply-side: China is holding firm to its 45 million tonne smelting capacity cap, new Indonesian production is coming online slower than expected, and the Middle East conflict is affecting roughly 9% of global aluminium supply.

More broadly, analysts are neutral on zinc and favour the non-ferrous metals space over ferrous (iron ore and steel) within the Indian market. On precious metals, BofA’s house forecast for silver sits in the $75–$80 per troy ounce range.

China remains the swing factor for global commodities

With China accounting for over 50% of global commodity demand, any meaningful demand recovery there would provide a significant tailwind across energy and metals. Analysts say it remains the single most important variable to monitor heading into the second half of 2026 and beyond.
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