Oil Marketing Companies Tumble as Crude Prices Firm Up Amid US-Iran Tensions

Strategic Insights -

Hindustan Petroleum (HPCL) and Bharat Petroleum (BPCL) shares plummeted 5.9% and 4.4%, respectively, on Thursday as global crude prices hit a two-month high. Upstream companies Oil India and ONGC, however, eked out modest gains despite gaining as much as 5.1% and 3.2% during the day. Analysts warn that rising crude oil prices may put pressure on the gross marketing margins of oil marketing companies, leading to a decline in their valuations.

Key Takeaways:

  • HPCL and BPCL shares dropped 5.9% and 4.4%, respectively, on Thursday due to the rise in crude oil prices.
  • Upstream companies Oil India and ONGC gained modestly despite rising crude prices, with Oil India and ONGC closing 5.1% and 3.2% higher, respectively.
  • Analysts at Prabhudas Lilladher and Kotak Securities stated that crude oil prices are expected to remain elevated in the near term due to escalating geopolitical tensions between the US and Iran.
  • The gross marketing margins of oil marketing companies like HPCL and BPCL may be impacted by rising crude oil prices, potentially leading to a decline in their valuations.
  • Oil India and ONGC may benefit from the rise in crude oil prices, with improved profit margins and better realisations.
  • Analysts warn that tensions between the US and Iran could lead to supply disruptions, causing a significant jump in crude oil prices.
  • Crude oil prices are anticipated to remain elevated around $68 in the near term, with a potential significant increase if tensions escalate.

Statistics:

  • HPCL shares dropped 5.9% on Thursday.
  • BPCL shares dropped 4.4% on Thursday.
  • US President Donald Trump said US personnel were being moved out of the Middle East, raising fears of supply disruptions.
  • Brent Crude Futures spiked 4.3% to a two-month high of $69.8 on Wednesday.
  • Brent Crude Futures retreated 0.8% to $69.23 on Thursday.

Sources:

  • "Rising crude oil prices are expected to put pressure on the gross marketing margins of oil marketing companies like HPCL and BPCL," said Swarnendu Bhushan, co-head of Institutional Research at Prabhudas Lilladher. "These companies are also trading at expensive valuations and are likely to witness a decline in the near term." [Source: Swarnendu Bhushan, co-head of Institutional Research at Prabhudas Lilladher]
  • "The key reason for the increase in crude oil prices is the escalating geopolitical tensions between the US and Iran, which may lead to supply disruptions," said Sumit Pokharna, vice-president at Kotak Securities. [Source: Sumit Pokharna, vice-president at Kotak Securities]