HPCL, BPCL, IOC shares fall up to 6% on crude oil rebound amidst middle east tensions
Shares of India's state-run oil marketing companies — Hindustan Petroleum Corporation Ltd. (HPCL), Bharat Petroleum Corporation Ltd
. (BPCL), and Indian Oil Corporation Ltd. (IOC) — are trading with losses of as much as 6% on Thursday, October 3.
HPCL shares have snapped their eight day winning streak, while BPCL and IOC are down for the second consecutive day.
Despite the decline, both HPCL and BPCL have gained nearly 57% and 55%, respectively, so far this year. Shares of Indian Oil have risen 32% so far in 2024, having underperformed its peers.
Crude oil prices edged up on Wednesday on worries that the escalating conflict in the Middle East could threaten oil supplies from the world's top producing region, but a large build in US crude inventories limited gains.
Brent futures rose 34 cents, or 0.46%, to settle at $73.90 per barrel. US West Texas Intermediate crude climbed 27 cents, or 0.39%, to settle at $70.10 per barrel.
In an interaction with CNBC-TV18, Probal Sen of ICICI Securities noted that refining margins saw a steep downturn in September, with Singapore gross refining margins at $2.5 per barrel.
He expressed concerns about potential retail fuel price cuts and how much oil marketing companies (OMCs) could absorb. Currently, crude oil prices are manageable for OMCs, but there is worry that if prices rise above current levels, it could pose challenges.
Sen added that a fuel price cut of
3-4 per litre would have been feasible for OMCs 3-4 days ago, as marketing margins on retail fuels were around
Former chairman and managing director of Hindustan Petroleum Corporation Ltd., Mukesh Kumar Surana said the situation with respect to crude oil prices changed substantially in the last 3-4 days.
Surana said that marketing margin cushion is needed to offset the sharp drop in GRMs and potential inventory losses.
According to JM Financial, the recent decline in Oil India and ONGC share prices on back of fall in crude price is an opportunity to 'Buy'; however, the brokerage firm remains cautious on OMCs as the recent spike in their marketing margin is unlikely to sustain.
The brokerage has maintained a 'Buy' on Oil India, with a price target of
720 per share and also ONGC with a target of
340, given robust 30% and 15% production growth outlook in the next 1-3 years; Oil India also benefits from lucrative NRL capacity expansion.
However, JM Financial believes that OMCs' risk-reward still appears unfavourable as the current market price is discounting gross marketing margin to be significantly higher than the historical average of
3.5 per litre and is ignoring OMCs' aggressive capex plans.
The brokerage has maintained a 'Sell' rating on HPCL, with a target price of
290, and IOCL
150 per share and 'Hold' rating on BPCL, with a target of
OMCs' valuations are trading at 20-40% premium to historical valuations.
As of Thursday afternoon, HPCL's market capitalisation stood at ₹88,911 crore, BPCL at ₹1.52 lakh crore, while that of Indian Oil is down to ₹2.42 lakh crore mark.
. (BPCL), and Indian Oil Corporation Ltd. (IOC) — are trading with losses of as much as 6% on Thursday, October 3.
HPCL shares have snapped their eight day winning streak, while BPCL and IOC are down for the second consecutive day.
Despite the decline, both HPCL and BPCL have gained nearly 57% and 55%, respectively, so far this year. Shares of Indian Oil have risen 32% so far in 2024, having underperformed its peers.
Crude oil prices edged up on Wednesday on worries that the escalating conflict in the Middle East could threaten oil supplies from the world's top producing region, but a large build in US crude inventories limited gains.
Brent futures rose 34 cents, or 0.46%, to settle at $73.90 per barrel. US West Texas Intermediate crude climbed 27 cents, or 0.39%, to settle at $70.10 per barrel.
In an interaction with CNBC-TV18, Probal Sen of ICICI Securities noted that refining margins saw a steep downturn in September, with Singapore gross refining margins at $2.5 per barrel.
He expressed concerns about potential retail fuel price cuts and how much oil marketing companies (OMCs) could absorb. Currently, crude oil prices are manageable for OMCs, but there is worry that if prices rise above current levels, it could pose challenges.
Sen added that a fuel price cut of
3-4 per litre would have been feasible for OMCs 3-4 days ago, as marketing margins on retail fuels were around
Former chairman and managing director of Hindustan Petroleum Corporation Ltd., Mukesh Kumar Surana said the situation with respect to crude oil prices changed substantially in the last 3-4 days.
Surana said that marketing margin cushion is needed to offset the sharp drop in GRMs and potential inventory losses.
According to JM Financial, the recent decline in Oil India and ONGC share prices on back of fall in crude price is an opportunity to 'Buy'; however, the brokerage firm remains cautious on OMCs as the recent spike in their marketing margin is unlikely to sustain.
The brokerage has maintained a 'Buy' on Oil India, with a price target of
720 per share and also ONGC with a target of
340, given robust 30% and 15% production growth outlook in the next 1-3 years; Oil India also benefits from lucrative NRL capacity expansion.
However, JM Financial believes that OMCs' risk-reward still appears unfavourable as the current market price is discounting gross marketing margin to be significantly higher than the historical average of
3.5 per litre and is ignoring OMCs' aggressive capex plans.
The brokerage has maintained a 'Sell' rating on HPCL, with a target price of
290, and IOCL
150 per share and 'Hold' rating on BPCL, with a target of
OMCs' valuations are trading at 20-40% premium to historical valuations.
As of Thursday afternoon, HPCL's market capitalisation stood at ₹88,911 crore, BPCL at ₹1.52 lakh crore, while that of Indian Oil is down to ₹2.42 lakh crore mark.