IOC, HPCL & BPCL Share Price Gains Upto 5% After Crude Oil Hits 3-Year Low

Market Performance

On March 6, the stocks of Indian oil marketing companies (OMCs) experienced notable gains as Brent crude oil prices had dropped below $70 per barrel, marking their lowest level in three years. Key companies such as Hindustan Petroleum Corporation Ltd.,Bharat Petroleum Corporation Ltd. , and Indian Oil Corporation Ltd. witnessed stock increases of up to 5%.

• BPCL rose by 3.2%, reaching ₹264.20.
• HPCL advanced by 4.8%, hitting ₹342.30.
• IOC climbed 3.7%, settling at ₹126.75.

This upward trend in OMC stocks coincided with a significant decrease in global crude oil prices.

Main News

Brent crude oil prices fell below the $70 per barrel mark following announcements from the oil-producing group OPEC+, which outlined plans to reverse voluntary production cuts gradually. The group intends to restore approximately 2.2 million barrels per day (mbd) of crude supply over two years. This adjustment accounts for 38% of the 5.9 mbpd reductions in place since 2022.

During early trading on the same day:

• Brent crude futures increased by 39 cents (0.56%), reaching $69.69 per barrel.
• West Texas Intermediate (WTI) crude futures also rose by 39 cents (0.59%) at $66.70 per barrel.

Over the previous four sessions:

• Brent crude experienced a 6.5% decline, hitting its lowest point since December 2021.
• WTI crude dropped 5.8%, marking its lowest level since May 2023.

Company Details

Oil Marketing Companies (OMCs)

With the decline in crude prices, Indian OMCs have seen improvements in gross marketing margins:

• Diesel: ₹8 per liter.
• Petrol: ₹12 per liter.

These margin levels are considered significant within the current market context, particularly because they balance costs related to LPG cylinder sales.

Upstream Producers

For upstream oil producers, recent crude price movements present particular challenges:

• If crude oil prices remain within the $70-75 per barrel range, approximately 6-9% earnings reductions are projected.
• These companies have already experienced adjustments in market valuation in response to anticipated lower revenues.

In January, production data showed:

• ONGC's oil production increased by 1.5% year-on-year (YoY), supported by its KG 98/2 asset.
• Oil India's gas output grew by 7% YoY.
• Overall crude oil production across these entities rose by 1% YoY.

Gas Companies

For gas-focused companies, declining crude prices may affect certain business areas:

• Petrochemical earnings are sensitive to crude-linked pricing structures.
• Liquefied Natural Gas (LNG) sales, particularly those tied to U.S. markets, may see narrowing profit margins due to relatively stable Henry Hub gas prices at $4.4 per million British thermal units (MMBtu).

Summary of the Article

The decline in Brent crude oil prices below $70 per barrel has contributed to stock price increases in India's oil marketing companies, including BPCL, HPCL, and IOC. This movement comes amid plans by OPEC+ to reintroduce previously reduced oil production volumes gradually. Lower crude prices have implications across the sector, with OMCs potentially benefiting from improved margins, while upstream producers and gas companies may face revenue pressures. Recent production figures from key industry players show modest growth despite broader market volatility.