Lower crude oil prices boost OMC stocks: IOC, BPCL, HPCL gain 4%

A sharp fall in crude oil prices brought relief to oil marketing companies (OMCs) during intraday trading on October 5.

Stocks related to the sector, including Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL), rose 1 to 4 percent on the BSE.

On the contrary, oil exploration related stocks like Oil India, Indraprastha Gas, Petronet LNG and ONGC remained unchanged. The S&P BSE Sensex rose 235 points or 0.3 percent to 65,461 at 10:30 a.m

Stocks of finished motor gasoline, an indicator of demand, fell to their lowest year-to-date level of 8 million barrels per day (bpd), according to a report from the US Energy Information Administration (EIA).

Additionally, crude oil inventories also fell by 2.2 million barrels in the week ended September 29, the lowest level since December 2022. This therefore resulted in Brent crude oil prices falling 9 percent on October 5 from September highs fell, while the price of WTI crude oil lost 11 percent.

In addition, economic news also put oil prices under pressure. The U.S. services sector slowed in September as the non-manufacturing purchasing managers’ index fell to 53.6 last month from 54.5 in August.

However, Rahul Kalantri, vice president of commodities at Mehta Equities, expects crude oil prices to remain volatile going forward, with support at $82.8-81 per barrel and resistance at $84.5-85.3. dollars per barrel. “In rupee terms, oil has support at Rs 6,940-6,870 while resistance is around Rs 7,120-7,200,” he added.

OMC shares have been under pressure in the last three months due to rising crude oil prices. Shares of IOC, BPCL and HPCL have fallen as much as 11 percent during the period, while the S&P BSE Oil & Gas Index fell 0.4 percent.

Against this backdrop, analysts at Prabhudas Lilladher believe that 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 deliver despite a rise in crude oil prices. to increase retail prices.

“As per our calculation, the gross margin on petrol and diesel stands at Rs 5.5 per liter with a loss of Rs 3.8 per liter in September 2023 as against Rs 10.6 per liter/Rs 10.2 per liter in the first quarter of the fiscal 24 and Rs 8.4/Rs 2.7 per liter per annum.”Q2FY24YTD,” the brokerage firm said.

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