Oil Firms Well-Positioned For Upside With Crude Expected To Be Between $60-70, Says Citi
After a challenging financial year 2025, Citi's Saurabh Handa sees significant improvement ahead.
Citi expects oil prices to remain in the $60–70 per barrel range over the next 12–18 months. This scenario works favourably for India both macroeconomically and sectorally, according to Saurabh Handa, head of India oil and gas and telecom at Citi.
Citi maintained a 'buy' rating on all three major OMCs. After a challenging financial year 2025—due to losses on the LPG front—Handa sees significant improvement ahead.
This comes at a time when crude still remains almost 12% lower this year as trade conflicts persist and OPEC+ has changed its strategy and abandoned the earlier strategy of defending higher prices by curbing output.
In the last two months alone, crude prices have tumbled to four year low amid US President Donald Trump's tariff wars.
If crude stays below $70–75, strong marketing margins from petrol and diesel can comfortably offset any LPG under-recoveries, noted Handa.
Additionally, refining margins have improved, and last year’s LPG receivable-related distortions are unlikely to recur, paving the way for more transparent and stronger earnings. Attractive dividend yields add further investor appeal.
On the upstream side, however, the outlook is less encouraging. The removal of windfall taxes combined with lower absolute oil prices is likely to pressure upstream realisations. Additionally, natural gas realisations—being linked to oil prices—are expected to soften as well, weighing further on upstream company performance.
Refining margins have shown a recovery this year, which bodes well for integrated players like Reliance Industries. Handa highlighted a favourable base effect for Reliance, as last year’s first quarter was notably soft. With both refining and retail business performance rebounding, the near-term outlook appears constructive.
Telecom: Bharti Airtel And Indus Towers Stand Out
In telecom, Citi maintains a positive stance on Bharti Airtel, driven by strong earnings visibility and the potential for a higher valuation multiple. Indus Towers also appears attractive to Citi, with a low valuation and appealing dividend yield. While there has been minor disappointment on the dividend payout front, Handa expects this to be resolved, enhancing the stock’s attractiveness in the medium term.
