Oil price shock rattles OMC stocks; profit outlook weakens if pump prices stay frozen

OMC stocks crash

• OMC shares plummet as crude oil prices exceed $115 per barrel
• UBS downgraded BPCL, IOC, and HPCL, citing weaker margins
• OMCs may face lower profits as pump prices remain unchanged

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Shares of oil marketing companies (OMCs) saw a sharp fall in trade on Monday, March 9, as the ongoing tensions in the Middle East led to one of the largest oil supply shocks, leading the price of crude oil to soar past $115 per barrel. Further, reports suggested that the pump prices of petrol and diesel will not be raised at present, and OMCs may have to make do with lower profits amid the spike in international oil prices.

As a result, at 9:50 a.m., shares of Bharat Petroleum sank 7% to Rs 328.15, Indian Oil tumbled 2% to Rs 168.1, while HPCL's shares sank 6.7% to trade at Rs 378.1 apiece.

Further, international brokerage UBS downgraded BPCL and Indian Oil Corp to 'neutral' with target of Rs 365 and Rs 175, respectively and also cut HPCL rating to 'sell' with target of Rs 340. The brokerage lowered FY27 profit forecasts by 19% for Indian Oil Corporation, 15% for Bharat Petroleum Corporation Limited, and 46% for Hindustan Petroleum Corporation Limited, citing weaker marketing margins.

UBS noted that the risk to oil prices remains skewed to the upside. While its base case assumes supply disruptions last only a few weeks, a prolonged conflict or attacks on energy infrastructure could push Brent crude above $90 a barrel, and potentially even beyond $100.

The brokerage also warned that even a modest rise in oil prices can significantly dent profitability if retail fuel prices remain unchanged. According to its estimates, a $5 per barrel increase in crude, if not passed on to consumers, could wipe out roughly half the profits of Indian OMCs by sharply eroding marketing margins.

However, at the current juncture,  Emkay Global noted that OMCs’ production is not yet affected due to 30-35 days of crude oil stocks along with 20-30 days of products, but extension of the Hormuz blockade will impact refining runs and final supplies ahead.

The sharp hike in oil prices and refining cracks has led to decline in integrated auto-fuel margins, from $20-28/bbl in Q3FY26 to -$6.5/bbl currently. "However, based on current rate, OMCs are likely to see better EBITDA QoQ in Q4, on lag in RTP accounting, higher core GRMs, and potential inventory gains of $5-6/bbl. This also means that any pricing and excise decisions may not be taken in the near term," added the brokerage.

If oil prices rise, the crude OMCs bought earlier at lower prices becomes more valuable. When refined and sold, this can generate inventory gains, estimated at about $5-6 per barrel.

However, according to research, oil markets have a long history of reacting sharply but often disproportionately to geopolitical conflict, with prices surging well beyond the scale of actual supply disruptions before eventually retreating, said an Equirus Securities' note. "Over the past 50 years, oil prices have repeatedly surged 250-300% during geopolitical crises, even when physical supply losses were temporary," the brokerage noted.

The Strait of Hormuz remains one of the most critical chokepoints in the global energy trade, handling nearly 20 million barrels per day (mb/d), which is nearly roughly one-fifth of global oil production. This comes even as Iran accounts for only 3% of the global oil production.

In 2025, exports moving through the strait averaged 13.4 mb/d of crude oil, along with 0.2 mb/d of condensates, 3.5 mb/d of refined products, and 1.4 mb/d of natural gas liquids (NGLs) and other liquids. The bulk of these shipments came from Saudi Arabia, Iraq and the UAE, which together exported about 13.1 mb/d of oil through the strait, with China emerging as the largest destination.

Although estimates differ across agencies, the International Energy Agency (IEA) has suggested that only about 4.2 mb/d of these flows could be rerouted through existing spare pipeline capacity if the strait were disrupted. This means that as much as 16 mb/d of oil could be at risk in the event of a complete closure of the Strait of Hormuz.

Also Read | No hike in petrol, diesel prices despite crude topping $100 per barrel; govt wants oil companies to absorb shock

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