OMC stocks in troubled waters? BPCL, HPCL, IOCL shares slump up to 2%; Brent at $114/barrel | What should investors do?
l Stock market today: Amid soaring crude oil prices due to supply disruption concerns, Indian OMC stocks have been under selling pressure since morning dealings. BPCL share price today opened lower at ₹286 per share on the NSE and touched an intraday low of ₹281.80 per share, logging a decline of around 2%. IOCL share price today corrected over 2.50%, whereas HPCL share price corrected over 2% within a few minutes of the Opening Bell on Friday.
According to stock market experts, OMC stocks are primarily under pressure due to the recent attacks on Saudi Arabia, which have exacerbated the crude oil supply disruption. This has driven Brent crude oil to $114 per barrel, while WTI has crossed the $100 per barrel mark. As this oil price rise will add pressure on these companies' balance sheets, the market is discounting this during Friday's dealings. However, they maintained that weakness in the Indian Rupee and fuel prices not rising in sync with global oil prices will weigh on OMC stocks. They advised OMC shareholders to avoid panic selling, as it is a short-term sentimental selling. OMC stocks may recover quickly once there is an easing of tensions in the Middle East.
It should be noted that every $1/bbl rise in oil price above ~$70/bbl hits OMCs’ auto-fuel GMM by ₹0.55/ltr and consolidated EBITDA by 7–9%, JM Financial had estimated in a report earlier, after the outbreak of the US-Iran war.
Speaking on the reason for fall in the OMC stocks on Friday, Avinash Gorakshkar, Founder of Avinash Mentor Research, said, “Fall in the OMC stocks on Friday can be attributed to three major reasons: soaring crude oil prices due to the fresh tension in the Middle East, petroleum product prices not rising in sync with the international crude oil prices, and weakness in the Indian Rupee.”
Gorakshkar said that all three factors will impact the balance sheets of OMCs, and it is the companies that will initially bear the costs of these developments.
“Given a lack of retail pricing freedom, OMCs will have to absorb higher crude prices, which will hit the balance sheets of the OMCs. The market is discounting the fact that OMCs’ costs will rise due to elevated crude premiums, higher freight expenses,” said Gorakshkar.
“The market has an idea that in India, retail fuel prices may not keep pace with international crude oil prices. If petrol and diesel prices remain relatively stable while crude rises, OMCs may absorb part of the cost increase. This can reduce marketing margins and earnings. The extent of the impact depends on actual fuel pricing and government policy,” said Anuj Gupta, a SEBI-registered market expert.
The Indian rupee snapped an eight-session winning streak on Thursday as Brent oil prices climbed to their highest level since May amid deepening worries about conflict in the Middle East, which hammered global equities as well. The South Asian currency endured a volatile trading session, swinging from its strongest level in over six weeks to close down 0.4% at 94.8175 per dollar.
“Crude is purchased internationally in dollars. A weaker rupee makes imports more expensive in local currency, compounding pressure on OMC finances. The RBI has introduced a special dollar facility for IOC, HPCL and BPCL, but this does not eliminate the underlying crude-price risk,” said Anuj Gupta.
Experts advised investors to avoid panic selling due to the crude oil rally. They said that the key risk for OMC stocks is not simply expensive crude, but whether BPCL, HPCL and IOCL can pass higher costs on to consumers without sacrificing sales or absorbing substantial losses. Rising crude is a headwind, not an automatic reason to sell every OMC stock.
Decoding the chart patterns of IOCL, HPCL and BPCL shares, Sumeet Bagadia, Executive Director at Choice Broking, said, “All OMC stocks are in a range. A bullish or bearish trend can be assumed upon the breakout of their respective ranges. IOCL share price is currently in the ₹120 to ₹132 range, BPCL share price is in the ₹275 to ₹300 range, whereas HPCL share price is in the ₹325 to ₹355 range.”
Brent oil headed for a third weekly gain as intensifying attacks on Saudi Arabia raised the risk of wider Middle East supply disruptions.
The global benchmark edged toward $114 a barrel on Friday and was up more than 3% this week, while West Texas Intermediate was near $100. Iran-backed Houthi militants claimed recent attacks on the Saudi Red Sea port of Yanbu, as well as deadly strikes on an oil field and airport in the kingdom.
The flare-up threatens to widen hostilities around the Strait of Hormuz, where crude exports have recovered to near prewar levels. Brent is up more than 85% this year because of the US-Iran war, now approaching its ninth month, while refined-product prices have risen even faster, most notably diesel.
At the White House on Thursday, President Donald Trump told reporters that the US has “knocked” out Iran and threatened to go “a little bit further,” without elaborating. The New York Times reported this week that the US and Israel have developed plans for renewed strikes against the Islamic Republic after the American midterm elections early next month.
(This is a developing story. Please refresh for more updates)
Asit Manohar has nearly two decades of experience in the mainstream media. In this period, he has served esteemed media organisations like NDTV Profit, The Economic Times, and Zee Business. He has been working at LiveMint Digital since April 2021. During these two decades of journey in mainstream media, Asit has mainly covered external affairs, markets and personal finance. However, his earliest beats include railways, SME, MSME, and politics (Congress beat). Some of his features on political, economic, and foreign policy are documented in the parliamentary records. <br><br> While pursuing his MA (Mass Communication, Session 2004-06), Asit began his media career as a stringer at All India Radio in Varanasi. At AIR Varanasi, Asit worked with the Gyanvani, Yuvvani and Vividh Bharti teams. After working for nearly one year at AIR Varanasi, he shifted to print journalism and started working as a stringer for the HT Media Ltd, Varanasi. At HT Media Ltd in Varanasi, he covered the BHU beat. <br><br> Asit has also worked with some brokerage houses. He has worked with Religare Broking and India Infoline, where he assisted the research team in developing and executing trade strategies for intraday cash, F&O, and commodities. <br><br> Asit is a Gold Medalist in MA (Mass Communication) from BHU, Varanasi. He did his BSc. (Hons) in Mathematics from Magadh University, Bodh Gaya. Asit was a National Talent Scholarship holder during his senior secondary studies (1988-91).
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HomeMarketsStock MarketsOMC stocks in troubled waters? BPCL, HPCL, IOCL shares slump up to 2%; Brent at $114/barrel | What should investors do?
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