Mumbai: A prolonged period of high oil prices could widen the credit gap among Asia-Pacific downstream Oil Marketing Companies (OMCs) by raising working-capital needs and pressuring free cash flow (FCF), while exposing differences in business models, capex burdens and policy support, Fitch Ratings said in a statement on Tuesday.
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The ratings agency said pure refiners with benchmark-linked margins and limited retail price risk are better placed than integrated fuel marketers exposed to delayed pass-through in an adverse scenario where Brent crude averages around USD 100 per barrel in 2026.
Fitch said the main credit risk is not a short-lived spike in prices, but “duration.” It added that sustained crude strength would affect companies through larger inventory holdings, higher refining volumes and greater working-capital needs.
Fitch said Indian oil marketing companies are more vulnerable if elevated crude prices persist. It said fuel marketing losses can quickly erode EBITDA if domestic pump prices do not adjust in line with input costs. The statement said companies’ large inventory holdings and refining volumes mean a sustained rise in crude prices would increase working-capital needs and pressure FCF. “This makes duration, rather than any short-lived price spike, the main credit risk,” Fitch said.
Fitch added that pressure on Indian issuers’ standalone credit profiles (SCPs) may diverge depending on business model and capex intensity.
Fitch said Indian Oil Corporation Ltd’s (BBB-/Stable) more diversified business mix should make its financial profile more resilient than peers. It said Bharat Petroleum Corporation Limited’s (BBB-/Stable) SCP headroom is more exposed to a prolonged adverse environment because of its rising expansion and transition spending.
For Hindustan Petroleum Corporation Limited (BBB-/Stable), Fitch said its limited SCP headroom should improve as major joint-venture growth projects are completed, but a longer period of high oil prices would delay that increase.
Fitch said similar factors drive broader regional divergence. It said Vietnam’s Binh Son Refining and Petrochemical Joint Stock Company (BSR, BB+/Stable) is better positioned than Indian oil marketers in the same environment because it is a pure refiner with no direct exposure to fuel marketing business facing cost pass-through pressure.
The agency said BSR’s higher use of domestic and non-Middle East crude should continue to support refinery utilisation, while tighter regional product supply can lift refining margins. “That should help offset the credit effects of higher oil prices,” Fitch said.
Fitch added that BSR’s credit profile should remain supported by a strong financial position and funding access, even as higher oil prices increase inventory funding needs.
Fitch said Chinese integrated oil companies should remain more resilient than standalone refiners under the adverse scenario. It said China Petroleum & Chemical Corporation (Sinopec)’s (A/Stable) integrated profile across upstream, refining, base chemicals and specialty chemicals should help offset weaker earnings in refining and chemicals, as stronger upstream profitability absorbs much of the pressure from higher feedstock costs.
It added that PetroChina Company Limited (A/Stable) has even greater upstream earnings exposure, so its overall profit is more likely to improve if oil prices stay elevated.
On CPC Corporation, Taiwan, Fitch said its (AA/Negative) SCP has limited headroom and could come under pressure in an adverse scenario. The agency said it recently revised the Outlook to Negative to reflect uncertainty over its ability to restore EBITDA interest coverage above 4.0x.
Fitch said CPC’s policy role in maintaining domestic refined-product prices and supply stability is likely to continue to weigh on its credit profile, despite generally adequate cost pass-through in its natural gas business.
Fitch said the Issuer Default Ratings (IDRs) of all Fitch-rated APAC refining and marketing companies are linked to their respective sovereigns or government-related entity parents. It said downward revision of SCPs would not affect IDRs in most cases because of strong parental linkages.
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The statement said policy settings will remain an important differentiator across APAC downstream credits. It said India’s government action has previously softened SCP pressure on oil marketers through excise-duty changes, retail price adjustments and other support measures, which are not factored into Fitch’s base case.
It added that in Vietnam, a government-controlled fuel price stabilisation fund implemented at retail level reduces the likelihood of direct refinery-level intervention.