OMC Stocks Gain In Early Trade As Crude Drops On Ceasefire Hopes

Shares of several oil marketing companies (OMCs) such as Hindustan Petroleum Corporation Limited (HPCL), Indian Oil Corporation Limited (IOCL) and Bharat Petroleum Corporation Limited (BPCL) rose up to 2%-3% in early trade on Wednesday. This came after crude oil prices fell about 5% following signs of easing tensions in the Middle East.

At around 10 am, HPCL shares were trading 3% higher at ₹347.20 per share on the National Stock Exchange (NSE). IOCL and BPCL shares were trading a little over 1% at ₹140.26 and ₹287.30, respectively.

Drop In Bent Crude Futures

Industry watchers attributed the surge to a drop in Brent crude futures that dropped following comments from US President Donald Trump. Trump said that Washington and Tehran are currently in negotiations and indicated that Iran is keen on a peace deal. At 10:06 am, Brent crude futures stood at USD 95.64 a barrel.

Lower crude prices gave some relief to Indian oil marketing companies, which have been dealing with higher raw material costs.

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Brokerages Remain Cautious

Brokerages, however, remained cautious in their stance.

While an international brokerage firm downgraded three state-run refiners, IOCL, BPCL and HPCL, citing uncertainty over crude prices, a domestic brokerage institution also flagged risks. It said oil refiners, downstream firms and gas companies could be the worst hit if crude sustains above $110 per barrel.

While higher gross refining margins may provide some support to OMCs, these gains may not fully offset weaker retail margins and rising LPG-related losses. Also, if Brent levels remain high, at around $100 per barrel, earnings for these companies could fall sharply.

Sources:

The Economic Times

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