Indian Oil To Bharat Petroleum: Oil Firms To Benefit From Festive Demand — Here's How

HSBC Global Research shared positive outlook on Indian oil marketing companies, noting that lower Brent prices and a bounce-back in auto fuel sales due to festive demand are supporting the profitability of Indian Oil Corp., Bharat Petroleum Corp., and Hindustan Petroleum Corp.

Within the Indian product slate, diesel and gasoline play the most important roles in driving demand. The brokerage noted that diesel demand has bounced back due to festive demand and improved economic activity, while gasoline remains robust due to an increasing share of gasoline-powered vehicles.

HSBC holds a positive stance on BPCL, HPCL, and IOC, citing oil price volatility as a deterrent to regulatory interventions in pump pricing. With a forecast of oil prices trending towards $70 per barrel in the long term, OMCs are expected to sustain healthy margins, fund capital expenditure, and continue their decarbonisation initiatives.

• Indian Oil Corporation: HSBC maintains a 'buy' rating with a target price of Rs 190 per share, indicating a potential upside of 36.9% from the previous close.

• Bharat Petroleum Corporation: 'Buy' rating with a target price of Rs 460 per share, implying a 48.5% upside.

• Hindustan Petroleum Corporation: 'Buy' rating with a target price of Rs 480 per share, suggesting a 27.8% upside.

Brent crude prices between $70-75 per barrel are favourable for OMCs' profitability, with refining spreads improving from late October. While OPEC+ has postponed its planned production increase, Brent prices remain around $72 per barrel, reflecting both demand concerns and supply risks. 

This lower Brent scenario supports OMC profitability by keeping fuel pump prices stable. HSBC’s global oil team forecasts Brent prices to average $73 per barrel in the fourth quarter of fiscal 2025 and decline to $70 per barrel in 2025, though supply disruptions may add short-term price pressures. 

India’s auto fuel sales rebounded following a slower couple of months, driven by increased economic activity and festive demand. Diesel demand grew 0.1% year-on-year in October, reversing declines from August and September, while gasoline demand surged 8.7% in October. Aviation turbine fuel saw a YoY rise of 9.4%, surpassing pre-Covid levels, as travel activity picked up. The overall demand for all petroleum products grew 2.9% YoY in October.

Diesel and gasoline, key to India’s petroleum demand, showed resilience in October, according to HSBC. Diesel, which makes up approximately 38% of India’s total petroleum consumption and nearly 70% of auto fuel demand, bounced back slightly after two months of weather-related declines. Gasoline demand, bolstered by a growing share of gasoline-powered vehicles, rose 8.7% YoY.