Indian oil firms’ March quarter results did not bring too many nasty surprises, though there were some disappointments.

Reliance Industries Ltd’s (RIL’s) refining business eked out a gross refining margin (GRM) of $11 a barrel last quarter. This was a bit lower than Street expectations. Refining earnings before interest and tax (Ebit) declined 11% year-on-year (y-o-y), primarily owing to reduced crude throughput and adverse move in Brent-Dubai differentials.

GRM, a key measure of profitability for refining firms, is derived by deducting the cost of crude oil it consumes from the total market value of refined products it produces.

RIL’s petrochemicals business performed well and compensated for the refining segment’s muted performance. Petchem Ebit rose as much as 87% y-o-y, supported by strong volume growth, higher margins for Polypropylene, downstream polyester products and fibre intermediate products.

Oil and gas continues to suffer from the adverse impact of declining volumes. This business posted an Ebit loss of Rs600 crore.

For oil producer Oil and Natural Gas Corp. Ltd (ONGC), higher crude prices were expected to benefit in the form of better price realizations. ONGC’s realizations were in keeping with expectations. However, higher costs took some sheen away. Further, other income, though much higher sequentially, declined by one-fifth, compared with the same period last year. Production performance was discouraging.

Meanwhile, profitability of the marketing segment improved for oil marketing companies (OMCs) last quarter. OMCs include Bharat Petroleum Corp. Ltd, Hindustan Petroleum Corp. Ltd and Indian Oil Corp. Ltd. Inventory gains boosted gross refining margins of these companies.

What of the stocks? For OMCs, Antique Stock Broking believes fiscal 2019—dotted with elections—could be challenging in terms of pricing/margins if crude prices stay firm. “Even if crude cools off, the respite on marketing side would be to some extent offset by inventory loss," added the brokerage.

ONGC shares have underperformed the benchmark Sensex in 2018. The outlook on crude is firm for the medium term. But, higher prices also mean subsidy sharing nightmares have re-emerged for investors. The government’s budgetary provision for LPG and kerosene for FY19 is Rs20,800 crore, which analysts reckon won’t be sufficient.

In general, if GRMs improve, it will be positive for OMCs and Reliance.