Cooling crude prices brings respite to OMC stocks; IOC, BPCL, HPCL rally up to 4%

Prices of Brent Crude fell 9 percent on October 5 from September highs, while the price of WTI Crude was off 11 percent

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A sharp decline in crude oil prices provided relief to oil-marketing companies (OMCs) during intra-day trade on October 5. Stocks related to the sector, including Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL), and Hindustan Petroleum Corporation (HPCL), surged in the range of 1-4 percent on the BSE.

On the contrary, oil-exploration linked stocks like Oil India, Indraprastha Gas, Petronet LNG, and ONGC traded flat. The S&P BSE Sensex was up 235 points or 0.3 percent to 65,461 levels, as of 10:30 am.

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According to a report by US Energy Information Administration (EIA), the finished motor gasoline supplies, a proxy for demand, declined to year’s low of 8 million barrels per day (bpd). Moreover, crude inventories, too, slipped by 2.2 million barrels in the week to September 29, lowest seen since December 2022.

This, therefore, triggered prices of Brent Crude to fall 9 percent on October 5 from September highs, while the price of WTI Crude was off 11 percent.

That apart, economic news also brought oil prices under pressure. The US services sector slowed in September as non-manufacturing PMI slipped to 53.6 last month versus 54.5 in August.

READ MORE: Crude prices slump to $86 a barrel on demand concerns, hit one-month low

That said, going ahead, Rahul Kalantri, vice-president – commodities at Mehta Equities expects crude oil prices to remain volatile, with support in the range of $82.8–81 per barrel and resistance at $84.5–85.3 per barrel. “In rupee terms, oil has a support of Rs 6,940-6,870, while resistance hovers around Rs 7,120–7,200,” he added.

In the past three months, OMC stocks have been under pressure due to boiling crude prices. Shares of IOC, BPCL, and HPCL have dropped up to 11 percent during the said period, as against 0.4 percent decline in the S&P BSE Oil & Gas index.

ALSO READ: India’s crude oil imports from Saudi Arabia drop 36% in September

Against this backdrop, analysts at Prabhudas Lilladher believes losses in marketing margins for all these companies are likely to continue in the July-September quarter of FY24 (Q2FY24) as they were unable to raise retail prices despite a climb in crude prices.

“As per our calculation, the gross marketing margin on petrol and diesel stands at Rs 5.5 per litre and loss of 3.8/litre, respectively in Sep 2023 versus Rs 10.6 per litre/10.2 per litre in Q1FY24 and Rs 8.4/2.7 per litre in Q2FY24YTD,” the brokerage firm said.

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