OMC Stocks Rally for Third Straight Session as Oil Prices Drop; BPCL, HPCL, IOC Gain Up to 6%

Shares of oil marketing companies (OMCs) continued their upward momentum for the third consecutive session on Wednesday, as a drop in global crude oil prices fueled investor confidence.

This positive trend follows the decision by the Organization of the Petroleum Exporting Countries and its allies (OPEC+) to gradually increase production—a move that benefits Indian refiners by enhancing their gross marketing margins on retail fuel.

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Stock Performance

Hindustan Petroleum Corporation Ltd (HPCL) saw a significant rise of 6.12%, reaching an intraday high of ₹334.5 on the National Stock Exchange (NSE). Over the past three sessions, the stock has surged by 13.22%. Likewise, Bharat Petroleum Corporation Ltd (BPCL) advanced 2.59% to ₹256.41 per share, extending its three-day rally to nearly 8%.

Indian Oil Corporation Ltd (IOC) also experienced a 3.35% rise, reaching an intraday high of ₹122 per share on the NSE, with an overall gain of 7% in the last three sessions.

Impact of OPEC+ Decision

OPEC+ has opted to move forward with a planned production increase of 138,000 barrels per day, marking the first such hike since 2022. This additional supply has exerted downward pressure on crude oil prices, proving advantageous for fuel retailers. For India, which imports more than 80% of its crude oil needs, lower oil prices reduce costs for refiners and improve profit margins for OMCs.

Brent crude, the global benchmark, declined by 0.34% to USD 70.80 per barrel. Analysts at Emkay Global anticipate a potential drop in Brent prices to the USD 60 per barrel range, although they consider the USD 70-75 per barrel range more likely compared to the previous estimate of USD 75-80 per barrel.

Broader Market Implications

The recent uptrend in OMC stocks also reflects a broader shift in investor sentiment towards the energy sector. With a reduction in crude oil prices, retail fuel prices in India could remain stable, easing inflationary pressures. Lower fuel costs could also benefit industries reliant on transportation, logistics, and manufacturing.

Moreover, lower crude oil prices typically contribute to an improved fiscal balance for India by reducing the country’s overall import bill. This could support the Indian rupee and provide additional room for the government to manage fuel subsidies more effectively.

Geopolitical Developments

Meanwhile, Reuters reports suggest that the United States is considering easing sanctions on Russia in an effort to address the ongoing Ukraine conflict. A relaxation of these sanctions could increase the supply of Russian crude in the global market, adding further pressure on oil prices. Increased availability of Russian oil could stabilize or further lower crude prices, creating additional benefits for oil-importing nations such as India.

While the situation remains dynamic, analysts believe that if crude prices continue their downward trajectory, OMC stocks could maintain their positive momentum. Investors are closely monitoring developments related to OPEC+ production plans, global demand trends, and geopolitical factors that may influence oil prices in the coming months.