Why OMC stocks BPCL, IOCL, and HPCL fall up to 5%: Here are the key reasons

Shares of oil marketing companies (OMCs) such as Bharat Petroleum Corporation Ltd, Hindustan Petroleum Corporation Ltd, and Indian Oil Corporation Ltd remained under pressure on Thursday’s morning session, declining around 5 per cent amid a rise in global crude oil prices.

On Thursday, Brent crude oil jumped 0.88 per cent to around USD 108 per barrel on the 20th day of the ongoing conflict, marking its sharpest single-day gain since March 3, following recent Iranian retaliatory strikes on energy infrastructure across the Middle East, including facilities in Qatar, the UAE, and Saudi Arabia.

OMC stocks like BPCL, HPCL, IOCL remain under pressure after rising crude prices

Bharat Petroleum Corporation Ltd (BPCL), Hindustan Petroleum Corporation Ltd (HPCL), and Indian Oil Corporation Ltd (IOCL) remained under pressure during Intraday trade. As of around 10:06 AM, BPCL was trading at Rs 292.75, down 3.61 per cent, while HPCL declined 5.95 per cent to Rs 328.55. IOCL was also trading lower at Rs 144.60, down 2.48 per cent. Earlier in the session, these stocks had declined up to around 4 per cent in intraday trade, compared to a marginal rise of around 2 per cent in the broader market. Currently, OMCs' stocks are 4 per cent to 20 per cent away from their respective 52-week lows.

Why OMC stocks are under pressure

Recent developments have taken the Middle East tensions to the next level, as the Israeli attack on Iran’s gas field at South Pars has led Iran to retaliate against the vital oil infrastructure of the Gulf states, including Qatar’s Ras Laffan, as well as the UAE and Saudi Arabia. After these developments, Brent crude moved higher, touching the levels of around USD 108 per barrel, as the market opened around 10:00 AM.

Impact on BPCL, IOCL and HPCL 

As per the reports, oil marketing companies (OMCs) are among the most impacted by rising crude oil prices. While higher gross refining margins (GRMs) can partly offset pressure from lower retail margins and rising LPG losses, earnings remain sensitive to crude price movements. At Brent levels of around USD 100 per barrel, earnings could decline sharply in the absence of retail price hikes, Tax cuts, or increased LPG subsidies. Among the OMCs, HPCL and BPCL are relatively more exposed due to their higher retail volumes compared to refining capacity, while IOCL is relatively better placed given its higher refining share, though it remains vulnerable if crude prices remain elevated and retail prices unchanged.

Additionally, GRMs for BPCL, HPCL, and IOCL are estimated to increase by around USD 0.5 per barrel for every USD 1 per barrel rise in crude oil prices, which could partly offset losses in petrol, diesel, and LPG segments.

Disclaimer: The article is for informational purposes only and not investment advice.