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The recovery in Indian OMCs share prices tracked the continued softness in crude. Brent crude settled 1.4 percent lower on Tuesday, and saw only mild, technical gains on Wednesday.
Multiple brokerages see clarity on pricing reform in crude oil and LPG under-recovery compensation as key positives
The Finance Ministry is finalizing the contours of the deal, and a Cabinet approval for the compensation could be sought soon, it is learnt.
Despite Brent crude rising nearly 5 percent to its highest level since February, stocks sensitive to oil prices — from refiners to paint makers — held firm in early trade as markets weighed the broader impact of the ongoing Middle East tensions
OMC stocks: The stocks snapped their two-day losing streak, which was earlier triggered by rising geopolitical tensions in the oil-rich Middle East.
Geopolitical concerns heightened after Iran said it will strike US bases in the Middle East if nuclear talks fail and conflict arises with Washington
Oil & Gas Stocks: Oil India shares jumped nearly 3% after Avendus Spark initiated a 'Buy' call, with a target price of Rs 630 per share. This implies a strong upside potential of over 44% from previous closing price.
A fall in Brent crude prices bodes well for oil marketing companies as it lowers their input costs, giving them more headroom to keep competitive prices, which eventually aids their margins.
As the tyre industry uses crude oil derivatives for manufacturing synthetic rubber, tyre stocks will remain in focus as a rise in crude price will hit their margins.
CLSA has a 'sell' call on all three leading OMCs. According to the foreign brokerage, Brent breakout at $88 per barrel is the breakeven point for marketing margins. Any additional increase in crude prices could potentially unsettle investors.
Motilal Oswal expects a negative stock price reaction for OMCs in the near term, given the retail price cut and recent elevated Brent prices
After the price cut, Hindustan Petroleum Corporation Limited may face a negative near-term impact on its integrated margin, while IOC could experience a similar effect due to its lower self-sufficiency ratio of 60 percent
HSBC analysts expect rangebound oil prices movement will support OMCs profitability in the near-term
Prices of Brent Crude fell 9 percent on October 5 from September highs, while the price of WTI Crude was off 11 percent
Over the past one month, shares of Bharat Petroleum Corporation Ltd (BPCL), Indian Oil Corporation (IOCL), and Hindustan Petroleum Corporation Ltd (HPCL) have risen 10-16 percent. And have gained around 18-33 percent during the past three months.
The S&P BSE Oil & gas was up half a percent led by IOC which added 1.4 percent followed by HPCL, Castrol India, BPCL, GAIL India, Reliance Industries and Oil India Limited.
