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.
Top 3 reasons for OMC stock price fall
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.
Brent crude price at $114/bbl
“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.
Retail fuel prices may not keep pace with soaring crude prices
“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.
Weakness in the Indian Rupee
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.
Oil price set to end higher for third straight week
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)
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