OMC stocks rise up to 5% as oil prices decline on cooling US-Iran tensions; Oil India, ONGC fall

OMC stocks rise

• OMC shares rose as US-Iran tensions eased, boosting investor sentiment
• Brent crude fell 4.8% to $66.02, WTI crude dropped nearly 5% to $61.98
• HPCL, BPCL, IOC gained; Oil India fell over 5%, ONGC rose nearly 3%

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The shares of oil marketing companies (OMC) jumped in trade on February 2 as tensions between US and OPEC member Iran eased, boosting investor sentiment. The shares of oil explorers however declined.

The OMC stocks were among the top gainers on the Nifty Oil & Gas index, which itself was up more than 1 percent to 11,585.95 in the morning trading hours of Monday.

Oil prices decline:

Brent crude futures were down $3.30, or 4.8 percent to $66.02 per barrel on Monday. U.S. West Texas Intermediate crude fell $3.23, or nearly 5 percent to $61.98 per barrel. This came after the prices hit multi-months highs earlier when US President Donald Trump threatened military intervention on Iran if it did not agree to a nuclear deal or continued killing protesters.

Later on Saturday, Trump told reporters that Iran was "seriously talking". This came hours after Tehran's top security official Ali Larijani said arrangements for negotiations were underway. "The crude oil market is interpreting this as an encouraging step back from confrontation, easing the geopolitical risk premium built into the price during last week's rally and prompting a bout of profit-taking," Reuters quoted IG market analyst Tony Sycamore as saying.

"Technically, crude oil day trend is likely to remain down side, where 5800 level will act as crucial resistance and selling can be initiated near this level. While, 5600 will be key support, a bounce is likely expected from support level. Selling pressure is likely to increase below support levels as prices have formed bearish candles which signaling a profit booking in crude oil for today's session," said Nirpendra Yadav, Sr. Commodity Research Analyst at Bonanza.

UBS said that India's decision in the federal budget to avoid raising excise duty on retail fuel removes key near-term overhang for oil marketing companies (OMC), and is supportive of marketing margins.

The brokerage flagged higher power sector capex and incentives for clean energy, carbon capture and storage as positives for broader energy value chain

Oil-related stocks:

Hindustan Petroleum Corporation (HPCL) shares jumped nearly 5 percent to trade at Rs 451.6 apiece. Bharat Petroleum Corporation (BPCL) and Indian Oil Corporation (IOC) shares also gained sharply.

While OMC stocks jumped, the shares of oil explorers tumbled. Oil India shares tumbled more than 5 percent, while Oil & Natural Gas Corporation (ONGC) shares gained nearly 3 percent.

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