Nomura expects crude oil prices to remain elevated in the near term as the ongoing West Asia conflict continues to create uncertainty around global supply, but maintains a bearish medium to long term outlook. The brokerage sees the possibility of the highest ever potential global oil surplus in 2027, which could push Brent crude prices closer to pre-crisis levels once geopolitical risks subside.

Nomura said US sanctions on Iran are unlikely to have a major immediate impact on global oil supplies. Iran currently exports around 0.5 to 0.6 million barrels per day, almost entirely to China, compared with 1.8 to 2.0 million barrels per day before the crisis. If Chinese refiners reduce purchases of Iranian crude, the resulting supply loss of around 0.5 percent of global consumption could remain manageable.

However, the brokerage warned that the oil market could become significantly more volatile if the US imposes sanctions on China based banks or if Iran retaliates by disrupting shipments through the Strait of Hormuz or targeting energy infrastructure across the region.

India faces additional pressure from changes in the economics of Russian crude imports. Russian oil accounted for a record 51 percent of India's crude imports in July, with volumes reaching around 2.79 million barrels per day. However, the discount on Russian Urals crude has almost disappeared, with the grade moving to a premium of around 1 to 2 dollars per barrel over dated Brent compared with a discount of about 12 dollars per barrel in mid July. Nomura expects India's imports of Russian crude to decline sharply in August.

Despite the elevated crude price environment, refining margins remain strong. Diesel and aviation turbine fuel cracks are currently above three times their historical averages. Nomura expects refining margins to take longer to normalise, creating a favourable environment for refiners with strong exposure to downstream operations.

Reliance Industries is viewed as a key beneficiary of structurally higher refining margins, according to Nomura. The brokerage also remains positive on Indian oil marketing companies despite near term challenges, with integrated margins currently estimated at around 8 to 13 dollars per barrel.

Within the OMC segment, Nomura prefers Indian Oil Corporation and Bharat Petroleum Corporation, noting that their margins could see meaningful upside if crude oil prices correct. The brokerage therefore sees potential for Indian refiners and OMCs to benefit from a combination of resilient refining margins and lower crude prices over the medium term.