Reliance O2C EBITDA rises 68% as fuel cracks stay tight

Reliance Industries Limited reported its highest-ever quarterly Oil to Chemicals performance in Q2 FY27, with EBITDA rising 67.9% year on year to Rs 25,203 crore. The increase came as fuel supply disruptions lifted diesel, jet fuel and gasoline cracks, while RIL used flexible crude sourcing, shipping and export placement to improve margin capture.

Why did RIL O2C EBITDA rise in Q2 FY27?

RIL O2C EBITDA rose because tighter fuel and feedstock markets increased product realisations. EBITDA reached Rs 25,203 crore in Q2 FY27, up from Rs 15,008 crore in Q2 FY26, while revenue increased 44.2% to Rs 231,601 crore from Rs 160,558 crore. EBITDA margin expanded by 160 basis points to 10.9% from 9.3%.

The increase was also sequential, with Q2 FY27 EBITDA 48.2% above Rs 17,010 crore in Q1 FY27 and margin up from 8.4%. Management attributed the quarter-on-quarter improvement to a lower crude basket cost through switching between East of Suez and West of Suez sources, improved margin capture and higher asset availability. It described crack spreads as being at multi-decade highs.

Which fuel markets gave RIL the largest margin opportunity?

Middle distillates gave RIL the largest margin opportunity because diesel and aviation turbine fuel, or ATF, cracks rose substantially above year-ago and five-year-average levels. Diesel cracks were US$65.8 per barrel in Q2 FY27, versus US$18.7 per barrel in Q2 FY26 and a five-year average of US$28 per barrel. ATF cracks were US$59.3 per barrel, compared with US$16.1 per barrel a year earlier and a US$25.5 per barrel five-year average.

RIL linked the conditions to disrupted diesel flows through the Strait of Hormuz, attacks on Saudi refining infrastructure and Russia's diesel export ban amid refinery outages. Global refinery outages stood at 11.8 million barrels per day, while global refinery runs were 79%, compared with 82% before the conflict. Gasoline and diesel inventories were 6% to 10% below their five-year averages.

Gasoline also contributed, although its Q2 FY27 crack of US$24.9 per barrel was below US$25.6 per barrel in Q1 FY27. It remained nearly three times the Q2 FY26 level of US$8.4 per barrel and above the five-year average of US$12 per barrel. RIL cited lower refinery runs in the Middle East, Russia and Asia-Pacific, low US inventory during the summer driving season and lower Chinese exports.

How did RIL use sourcing and exports to capture fuel cracks?

RIL used multi-region crude sourcing, logistics management and product placement in higher-netback markets to capture elevated cracks. It reported record crude runs despite Strait of Hormuz disruption and recalibrated crude sourcing among the Americas, Middle East and Mediterranean regions. Throughput was 20.6 million metric tonnes in Q2 FY27, compared with 20.8 million metric tonnes in Q2 FY26.

Total production meant for sale stayed at 18.1 million metric tonnes in both periods, but the mix changed. Transportation fuels declined to 12.0 million metric tonnes from 12.1 million metric tonnes, polymers fell to 1.6 million metric tonnes from 1.7 million metric tonnes, and intermediates and polyesters declined to 2.0 million metric tonnes from 2.2 million metric tonnes. Other products increased to 2.5 million metric tonnes from 2.1 million metric tonnes.

RIL shifted product placement to East, West and South Africa, Latin America, Europe and Australia. In gasoline, its share in East and South African markets rose from 30% to about 50% after Middle East supply dropped. RIL supplied 98R gasoline to Australia, 95R to South Africa and 93R to Kenya and Tanzania, while supplying jet fuel and diesel to Mediterranean markets and its first low-sulphur jet fuel to South Africa.

What costs and domestic factors limited RIL O2C earnings?

Higher crude premiums, freight, insurance and domestic levies limited the earnings effect of elevated international fuel cracks. Brent ranged from about US$70 to US$130 per barrel, while physical crude carried a significant premium to paper prices. RIL also cited high operating costs from tight logistics markets and energy prices, although a higher share of time-chartered vessels mitigated freight costs.

Domestic tariff area margins were capped at normal levels because of Special Additional Excise Duty on motor spirit, high-speed diesel and ATF. RIL also reported under-recovery in domestic fuel retailing and lower alkylate and petrochemical output. Polyester-chain margin increased 33%, led by paraxylene and purified terephthalic acid, while the company retained benefits from ethane cracking over naphtha cracking.

Domestic transport-fuel demand supported the operating backdrop in Q2 FY27. Gasoline demand rose 8.5% year on year to 11.3 million metric tonnes and diesel demand increased 7.5% to 22.3 million metric tonnes. ATF demand rose 1.0% to 2.16 million metric tonnes, while total oil demand was 57.1 million metric tonnes, flat year on year as weaker liquefied petroleum gas and naphtha offset transport fuels.

What does RIL expect for refining markets after Q2 FY27?

RIL expects refinery margins to remain supported while product inventories need rebuilding, but it identifies demand, crude supply and freight as uncertainties. Its presentation projects ex-China refining capacity to be flat to negative in 2026, with about 0.3 million barrels per day of potential additions against about 0.6 million barrels per day of closures. It also cites global oil demand declining by 2.6 million barrels per day in calendar 2026 before rebounding by 2.0 million barrels per day in calendar 2027.

RIL's stated priorities are agile market actions, multi-geography crude sourcing, refinery processing of a wide range of crudes and high asset utilisation. The company also plans to maximise margin realisation through end-to-end value-chain optimisation. It expects Asian and Middle Eastern refinery runs to rise gradually, while refinery maintenance in the United States and Europe during 2027 could affect product supply.

Conclusion

RIL's Q2 FY27 O2C result was driven principally by refining economics rather than greater saleable output. EBITDA rose to Rs 25,203 crore while production meant for sale remained at 18.1 million metric tonnes, as constrained fuel supply lifted diesel, ATF and gasoline cracks and RIL redirected crude and products across regions.

The next issue is whether disrupted capacity, trade flows and inventory rebuilding continue to support margins through calendar 2026 and 2027. RIL's plan centres on multi-geography sourcing, refinery reliability and product-placement optimisation, while Middle East supply, Russian diesel exports, China's gasoline-export policy and freight costs remain unresolved factors.