OMCs slip over rising crude prices; profit booking in process

Oil marketing companies, OMCs, have taken a backseat slipping over rising crude oil prices. Last three weeks have seen more or less soaring oil prices driven by Saudi Arabian purge and geopolitical tensions in Saudi and Yemen. Overall, demand uptick across the globe has led in the surge in Brent Crude and crude oil and if the situation persists oil is expected to hit US$70 or even US$100 per barrel in the medium term.

Speaking of the domestic market, OMCs and airline sector stocks are seen nosediving as these companies have limited scope to pass on the price rise to their consumers.

The three biggest organised OMCs BPCL, HPCL and IOC have witnessed almost a consistent fall from the end of October 2017 and are trailing near major support levels. BPCL hit an all-time high on October 30 after surging for five consecutive weeks. The fifth week had created a shooting star pattern with which the stock witnessed two consecutive falls thereafter. BPCL has fallen nearly 11.6 per cent since then. HPCL is already off its all-time high made in August end 2017. For HPCL its fourth consecutive week of fall with plunging 13 per cent from October 30 week. On similar grounds, IOC has fallen nearly 8.9 per cent . On the contrary benchmark indices corrected only 2.7-3 per cent majorly driven by the OMCs only.

However, considering the broader view, it’s just profit booking by market participants as the OMCs have been consistently rising since the mid of 2016. Going forward, the global oil prices will decide the fate of these companies and how the world indices react to the same.