PSU OMCs slide as crude oil boils
Shares of three state-run oil marketing companies fell 1.2% to 2.6% after Brent crude prices flared up following an Israeli airstrike on Iran that sharply escalated tensions in the Middle East.
In commodities, Brent crude (August 2025 contract) soared $5.59, or 8.06%, to $74.95 per barrel amid heightened geopolitical tensions.
Meanwhile, the Nifty 50 index was down 203.45 points, or 0.82% at 24,685.25.
BPCL (down 2.59%), HPCL (down 2.24%) and Indian Oil Corporation (down 1.2%) edged lower.
The heightened geopolitical unrest has sparked fears of potential disruptions to global oil supplies, especially through key transit points like the Strait of Hormuz.
Higher crude oil prices could increase under-recoveries of PSU OMCs on domestic sale of LPG and kerosene at controlled prices. The government has freed pricing of petrol and diesel.
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Economic Times
9 minutes ago
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The recent rise in crude oil prices may prove beneficial not only for upstream oil companies but also for oil marketing companies (OMCs), according to a report by domestic brokerage firm Kotak Institutional Equities. ADVERTISEMENT In a recent note, the brokerage highlights that the latest rally in oil prices, with Brent crude being up 15% since early June, could aid upstream companies such as ONGC and Oil India by lifting their net realizations and earnings. "Brent has moved up to US$85/bbl from US$74/bbl earlier in the month," the brokerage said, adding that every US$1/bbl increase in Brent prices adds Rs 2.4–2.5/share to ONGC's EPS and Rs 3.5–4/share to Oil India's EPS, assuming no changes in government levies. According to Kotak, ONGC's base case assumes an oil price of US$80/bbl Interestingly, the brokerage also sees the potential for OMCs to benefit from higher oil prices under current market conditions. 'Oil marketing companies (BPCL, HPCL, IOCL) may benefit too, if the government maintains current pump prices,' Kotak stated. The report notes that despite the recent increase in Brent prices, auto fuel prices have remained unchanged in India, implying potential margin expansion for OMCs. ADVERTISEMENT "OMCs are seeing marketing margins rise to Rs 5.6/liter for diesel and Rs 7/liter for petrol," the report stated, assuming average Brent at US$85/bbl and a USD/INR exchange rate of Kotak points out that HPCL's marketing EBITDA was Rs 3.5/liter in FY24, suggesting that current margin levels may offer substantial upside if they persist. The firm acknowledges that while refining margins remain modest, the improving marketing profitability may offset those concerns. ADVERTISEMENT On refining, the brokerage notes that gross refining margins (GRMs) continue to be relatively weak, with Singapore complex GRM currently at US$3.5–4/bbl, and diesel cracks at US$13–14/bbl, which are below seasonal averages. Also read: HDB Financial Services GMP at 6.3% ahead of IPO. What should investors do? ADVERTISEMENT Nevertheless, the note emphasizes that product cracks are not as weak as GRMs suggest, and that the margins are still acknowledging the volatility in the crude market, Kotak Institutional Equities underlines that higher oil is unequivocally good for upstream companies and may not hurt OMCs in the near term either. ADVERTISEMENT The brokerage firm also stated that it continues to prefer ONGC and Oil India among upstream players and maintains a 'buy' rating on both stocks. (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times) (You can now subscribe to our ETMarkets WhatsApp channel)
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16 minutes ago
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Barometers trade with major losses; FMCG shares decline
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Higher crude oil prices a net positive for upstream cos, possibly for OMCs too: Kotak Equities
The recent rise in crude oil prices may prove beneficial not only for upstream oil companies but also for oil marketing companies (OMCs), according to a report by domestic brokerage firm Kotak Institutional Equities. In a recent note, the brokerage highlights that the latest rally in oil prices, with Brent crude being up 15% since early June, could aid upstream companies such as ONGC and Oil India by lifting their net realizations and earnings. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Indonesia: New Container Houses (Prices May Surprise You) Container House | Search ads Search Now Undo "Brent has moved up to US$85/bbl from US$74/bbl earlier in the month," the brokerage said, adding that every US$1/bbl increase in Brent prices adds Rs 2.4–2.5/share to ONGC's EPS and Rs 3.5–4/share to Oil India's EPS, assuming no changes in government levies. Play Video Pause Skip Backward Skip Forward Unmute Current Time 0:00 / Duration 0:00 Loaded : 0% 0:00 Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 1x Playback Rate Chapters Chapters Descriptions descriptions off , selected Captions captions settings , opens captions settings dialog captions off , selected Audio Track default , selected Picture-in-Picture Fullscreen This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Opacity Opaque Semi-Transparent Text Background Color Black White Red Green Blue Yellow Magenta Cyan Opacity Opaque Semi-Transparent Transparent Caption Area Background Color Black White Red Green Blue Yellow Magenta Cyan Opacity Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Drop shadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. According to Kotak, ONGC's base case assumes an oil price of US$80/bbl Interestingly, the brokerage also sees the potential for OMCs to benefit from higher oil prices under current market conditions. 'Oil marketing companies ( BPCL , HPCL , IOCL ) may benefit too, if the government maintains current pump prices,' Kotak stated. Live Events The report notes that despite the recent increase in Brent prices, auto fuel prices have remained unchanged in India, implying potential margin expansion for OMCs. "OMCs are seeing marketing margins rise to Rs 5.6/liter for diesel and Rs 7/liter for petrol," the report stated, assuming average Brent at US$85/bbl and a USD/INR exchange rate of 83. Furthermore, Kotak points out that HPCL's marketing EBITDA was Rs 3.5/liter in FY24, suggesting that current margin levels may offer substantial upside if they persist. The firm acknowledges that while refining margins remain modest, the improving marketing profitability may offset those concerns. On refining, the brokerage notes that gross refining margins (GRMs) continue to be relatively weak, with Singapore complex GRM currently at US$3.5–4/bbl, and diesel cracks at US$13–14/bbl, which are below seasonal averages. Also read: HDB Financial Services GMP at 6.3% ahead of IPO. What should investors do? Nevertheless, the note emphasizes that product cracks are not as weak as GRMs suggest, and that the margins are still reasonable. While acknowledging the volatility in the crude market, Kotak Institutional Equities underlines that higher oil is unequivocally good for upstream companies and may not hurt OMCs in the near term either. The brokerage firm also stated that it continues to prefer ONGC and Oil India among upstream players and maintains a 'buy' rating on both stocks.
