Reliance O2C Profit Surges Despite Russian Crude Constraints

Reliance Industries' Oil-to-Chemicals (O2C) segment is seeing strong profitability, minimal reliance on discounted Russian crude contributing just 2% of consolidated Ebitda, according to Jefferies. Increased logistics and insurance costs offset any discount benefits, yet the division enjoys a 15% year-on-year growth in the first half of 2026, surpassing the annual forecast of 8%.

The Jefferies report highlights European diesel spreads remaining firm into the second quarter. This is attributed to decreased imports following the EU's ban on Russian crude-refined products. Inventories are below their five-year averages, with Reliance strategically positioned to leverage Middle Eastern crude for diesel production aimed at EU markets. US gasoline margins also show strength.

Refinery closures aid refining profitability, with shutdowns totaling 1.1 million barrels per day in CY25, eclipsing those in 2023-24. Net capacity additions of 0.5 million bpd in CY25 fall short of the 0.7 million bpd demand growth projection. Petrochemical margins are static but may see uplift from recent Asian capacity closures and China's policy shifts. Jefferies notes a 20% year-on-year growth in the second quarter's profitability, enhancing visibility on the projected FY26E O2C EBITDA of Rs 594 billion, despite the impact of decreased diesel spreads.

(With inputs from agencies.)