Shares of oil & gas companies traded sharply lower on Monday, in-line with the broader Indian stock market crash, after crude oil prices surged amid escalating US-Iran war in the Middle East.
The Nifty Oil & Gas index declined 1.6%, with all its constituents trading in the red. Chennai Petroleum Corporation shares were the top loser in the index with a fall of 3.2%. It was followed by Indian Oil Corporation Ltd, Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) shares which dropped more than 2.5% each.
Adani Total Gas, Mahanagar Gas and GAIL (India) shares declined over 2% each, while Indraprastha Gas, Petronet LNG and Reliance Industries shares also dropped over 1% each.
Crude oil prices jumped as efforts to end the US-Israeli war on Iran appeared to have stalled, after a nuclear power plant in the United Arab Emirates came under attack and as US President Donald Trump is expected to discuss military options on Iran.
Brent crude futures rallied 1.91% to $111.35 a barrel, after touching $112 earlier, the highest since May 5. US West Texas Intermediate crude was at $107.81 a barrel, up 2.27%, following a rise to $108.70, its highest level since April 30.
Rising crude oil prices increases the input costs for oil refiners, exerting pressure on their margins.
Fuel Price Hike Impact
Last week, the state-run OMCs increased petrol and diesel prices by ₹3 per litre each, marking the first fuel price hike in four years. The petrol, diesel price hike came amid a nearly 50% jump in global crude oil prices over the same period.
Analysts believe the hike remains inadequate relative to prevailing losses, but reduces daily under-recoveries of OMCs by ₹100 crore, ie from ₹600 crore to ₹500 crore on auto-fuels, assuming prevailing spot Brent of $110 per barrel, the Indian rupee at 96 per US dollar, and normalized refining cracks of $15 per barrel.
On a per litre basis, integrated under-recoveries post price hikes stand at ~ ₹13, which implies a Delhi equivalent RSP hike of ~ ₹15, said Sabri Hazarika, Senior Research Analyst at Emkay Global Financial Services Ltd.
Additionally, a sharp increase in international LPG prices has further aggravated losses. At current Saudi CP of $750 per mt, the analyst estimates LPG under-recovery at ₹420 per cylinder. However, HPCL management has stated ₹670 per cylinder in its recent call, which could be due to premiums on delivered spot cargoes.
At ₹420-670 per cylinder, daily losses on LPG stand at ~ ₹200 crore- ₹400 crore, Hazarika added.
She believes the continuation of the crisis could lead to more RSP hikes in auto-fuels, but in a staggered manner.
“There are some under-recoveries on ATF also, as the rate change for domestic scheduled airlines was lower than expected, with no change since April 2026. The increase in liquid fuel prices has created headroom for CNG price hikes, with IGL and MGL raising RSPs by ₹2 per kg each. The increase is expected to improve EBITDA/scm by ~Rs1 for both, with IGL’s EBITDA/scm expected at ~ ₹5.5 and MGL’s at ~ ₹7-8,” said Hazarika.
Emkay Global maintained a cautious stance on OMC stocks and CGD stocks amid the volatile and elevated pricing environment. It retained ‘Add’ rating on Indian Oil Corporation, BPCL, HPCL, Indraprastha Gas, and Mahanagar Gas shares.
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