HPCL, BPCL, Indian Oil Shares Trade Lower After Brent Decline-Fueled Rally
International oil prices declined on concerns over the demand outlook and oversupply in the market, especially in China.
Shares of oil marketing companies Hindustan Petroleum Corp., Bharat Petroleum Corp., and Indian Oil Corp. declined by noon on Wednesday, reversing early gains which were seen after the international benchmark Brent crude slipped to the lowest level since 2021, dropping below the crucial $70 per barrel mark.
The Organisation of Petroleum Exporting Countries maintained its demand forecast steady despite extending its supply constraints for an additional two months.
In its monthly report, OPEC projected that global oil demand will increase by 2.03 million barrels per day (bpd) in 2024, a reduction from the 2.11 million bpd growth it anticipated last month. Additionally, it revised its 2025 global demand growth estimate down to 1.74 million bpd.
The International Energy Agency — which previously forecast a surplus next year — is due to publish its own monthly report this week.
OMCs are significant beneficiaries of crude oil price decline. Their earnings primarily rely on two segments: refining and marketing. The refining segment involves transforming crude oil into valuable products like petrol, diesel, and jet fuel, while the marketing segment focuses on the distribution and sale of these refined products.
Indian Oil, BPCL, and HPCL have kept their retail prices for petrol and diesel unchanged for the past 28 months. Consequently, the fluctuations in oil prices and refining margins now closely influence their marketing margins. With oil prices on a downward trend and global refining margins recovering, this situation is favourable for oil marketing companies.
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Shares of HPCL, BPCL and Indian Oil were trading up to 2% lower at 12:55 p.m.
The benchmark Nifty 50 was trading in the green.
