IOC, BPCL, ONGC offer significant upside as oil prices off 25% from highs: JP Morgan

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26 Aug, 2025 12:21

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Fuel retailers such as Bharat Petroleum Corporation, Hindustan Petroleum Corporation and Indian Oil Corporation recouped some of August-September's losses in October-November after sharp fall in crude oil prices.

IOC fell more than 25 percent in August and September followed by around 20 percent recovery in October and November amid volatility. HPCL lost 43 percent and BPCL 39 percent followed by recovery of 49 percent and 23 percent respectively in the same period.

Brent crude futures, the international benchmark of oil prices, after rising to $86 a barrel, the highest level since November 2014 corrected 27 percent to trade around $63 a barrel amid global growth concerns and increase in supply from OPEC countries.

JP Morgan said IOC, HPCL and BPCL offer significant upside even on conservative assumptions as oil prices are significantly off from their highs but stocks are still 20-25 percent below their recent highs.

"Markets continued to factor in the risk of large subsidies being borne by companies, but we disagree with bearish investors on subsidy risk for companies," it said.

After cutting excise duty by Rs 1.5 per litre, the government had asked these companies to bear Re 1 a litre on petrol/diesel prices, which raised fears of likely subsidy burden and caused selling pressure in oil marketing companies in September.

The global research house believes oil will remain rangebound and large under-recoveries are unlikely.

The government has effectively brought down subsidies to just one product - LPG and kerosene under-recovery will fall sharply given price hikes, said JP Morgan which estimated that marketing margins are closer to normal levels now.

Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.