BPCL, HPCL to IOC: OMC stocks fall up to 3% on sharp rebound in crude oil prices

OMC stocks under pressure: Shares of oil marketing companies (OMCs) fell up to 3% on Thursday, February 19.

The three state-run OMCs—Hindustan Petroleum Corporation (HPCL), Bharat Petroleum Corporation (BPCL) and Indian Oil Corporation (IOC) —saw a retreat in their share prices, giving up recent gains, as the rebound in global crude prices weighed on investor sentiment amid concerns over potential pressure on marketing margins.

BPCL share price dropped as much as 3% to ₹370.80 apiece, while HPCL fell 2.75% to ₹444.40 and IOC stock slipped as much as 2% to ₹175.24 apiece.

Geopolitical tensions lift crude oil prices

Crude oil prices staged a strong comeback in the previous session, with WTI crude futures rising 4.60% to $65.19 per barrel, while Brent crude futures also climbed 4.35% to $70.35 per barrel.

Both benchmarks posted their highest settlements since late October, as traders priced in potential supply disruptions amid concerns over a conflict between the US and Iran, and after talks between Ukraine and Russia in Geneva ended without a breakthrough.

Reports indicated that any US military action would likely unfold as a weeks-long campaign, with Israel’s government advocating an outcome aimed at regime change in the Islamic Republic.

A potential conflagration would put crude flows at risk in the Strait of Hormuz, a key chokepoint for energy exports from the world’s top oil-producing region.

Talks so far have been inconclusive, with Tehran saying it reached a “general agreement” with Washington on the terms of a potential deal, while Vice President JD Vance said Iran failed to address US red lines, and President Donald Trump reiterated that military force remains an option.

Meanwhile, a second day of US-brokered meetings in Geneva between Russia and Ukraine ended after barely 90 minutes, as Ukrainian President Volodymyr Zelenskiy accused Moscow of attempting to prolong the process.

How does the oil price rise impact OMCs?

A rise in crude oil prices generally puts pressure on OMCs such as BPCL, HPCL, and IOC, as crude constitutes the bulk of their input costs. Higher crude prices increase the overall expense of refining and fuel production.

If petrol and diesel pump prices are not revised upward in proportion to the increase in crude, OMCs may face pressure on marketing margins, which could weigh on their earnings.

Elevated crude prices also increase the country’s import bill and can stretch the companies’ working capital requirements, potentially impacting cash flows. Moreover, when OMCs hold inventory purchased at higher prices, they risk inventory losses if retail prices or product realizations fail to keep pace with input cost increases.

(With inputs from Reuters)

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