OPEC meet's outcome to freeze output hits prices of IOMCs

Two years ago, global oil prices crashed after the world started pumping out far more crude than anyone needed. The crude prices plunged from USD 100 per barrel  down to USD 40. 

In a much awaited meet that took place Wednesday, the Organisation of the Petroleum Exporting Countries (OPEC) reached a deal to reduce their oil production by 1.2 million barrels per day in order to raise global prices. OPEC is a cartel of 13 major oil exporters, including Saudi Arabia, Iran and Iraq, accounting for one-third of global output. Post the meet Crude oil prices shot up 13 per cent after OPEC and Russia reached a consensus to reduce output to drain a global supply glut.The outcome of the OPEC meet has hit the share prices of Indian oil marketing companies significantly.

The shares of oil marketing companies like Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation are down in a range of 5 to 2 per cent on an intraday basis. As crude oil prices go up, it will hurt the profitability of oil marketing companies in near term. The operational margins could contract on rising crude oil prices. The share prices of oil marketing companies are anticipating the impact on upcoming quarterly results.