Shares of oil marketing companies (OMCs), including BPCL, HPCL, and IOCL, rallied up to 4% on Friday, January 16. HPCL’s share price jumped as much as 3.7% to ₹456.50 apiece, while BPCL rallied 3% to ₹367.75 and IOC gained as much as 2%.
The three state-run OMCs—Hindustan Petroleum Corporation Ltd, Bharat Petroleum Corporation Ltd, and Indian Oil Corporation Ltd—saw a sharp movement in their share prices, rebounding from recent weakness as the drop in global crude prices brought sentiment back to these counters, which had suffered losses lately.
Easing Middle East tensions trigger biggest single-day drop in crude prices
After maintaining a winning run for five straight sessions, both Brent and WTI futures came off sharply in Thursday's session after the likelihood of a US strike on Iran receded.
Brent crude futures finished the previous session with a drop of 4.15% at $63.76 per barrel, while WTI crude futures fell 4.6% to $59.19 per barrel.
Earlier this week, both Brent and WTI rose to multi-month highs after protests flared up in Iran and US President Donald Trump signaled the potential for strikes on the nation. Brent prices were still set for a fourth week of gains.
Late on Thursday, however, Trump said Tehran's crackdown on protesters was easing, allaying worries about possible military action that could disrupt oil supplies. Iran, one of the top producers in the Organization of the Petroleum Exporting Countries (OPEC), is facing its biggest anti-government demonstrations in years.
Reports on Thursday also suggested that Israel and several Middle Eastern allies had asked the US to delay any attack on Iran amid fears Iran would retaliate by striking their countries. This reduced the perceived risk of an immediate conflict that could disrupt Iranian oil production or critical shipping routes in the region.
On Wednesday, OPEC said oil supply and demand would remain balanced in 2026, with demand rising in 2027 at a similar pace to growth this year.
Oil giant Shell released its 2026 Energy Security Scenarios on Thursday, making a bullish case for energy demand and oil growth. The company estimated that primary energy demand by 2050 could be 25% higher than last year.
Impact on OMCs
A fall in crude oil prices generally works in favour of oil marketing companies (OMCs) like BPCL, HPCL, and IOC as crude forms the bulk of their input cost. Cheaper crude lowers the overall expense of refining and fuel production.
If petrol and diesel pump prices are not reduced in proportion to the drop in crude, OMCs are able to retain higher marketing margins, which directly strengthens their earnings.
Softer crude prices also help bring down the country’s import bill and ease the companies’ working capital needs, leading to better cash flow. Moreover, when OMCs carry inventory bought at lower prices, they can book inventory gains if the final products are sold at current, relatively higher market prices.
(With inputs from Reuters)
Disclaimer: We advise investors to check with certified experts before making any investment decisions.
