Oil marketing companies’ (OMCs’) shares fell as much as 6 per cent in trade on the BSE amid a surge in oil prices due to intensifying tensions in West Asia. At 9:43 AM, Bharat Petroleum Corporation (BPCL) share price was trading 3.74 per cent lower, Hindustan Petroleum Corporation (HPCL) was down 4.2 per cent and Indian Oil Corporation (IOCL) slipped 3.01 per cent . In comparison, the BSE Sensex was up 1.78 per cent at 76,170.63.
The selling on the counters came after oil prices surged above $100 per barrel as escalating tensions in West Asia spooked investors. Last check, Brent crude oil futures were up 7.32 per cent at $102.17 per barrel.
According to a Business Standard report, the profitability of India’s OMCs is likely to come under renewed pressure after peace talks between the US and Iran ended without a breakthrough, a development analysts say could keep energy prices elevated.
The conflict in West Asia is likely to drag on, with uncertainty looming over the reopening of the Strait of Hormuz, posing energy supply challenges for Indian companies amid high energy prices. The US and Iran failed to reach an agreement on Sunday, with key differences remaining over the status of the Strait of Hormuz and Tehran’s nuclear programme, according to officials.
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As state-run OMCs have left fuel prices unchanged despite crude prices rising to over $100 per barrel, the firms are incurring steep under-recoveries of ₹24.40 per litre on petrol and ₹104.99 per litre on diesel at current retail selling prices, the report highlighted.
In a bid to secure domestic energy supplies and curb exports, the government has sharply increased export duties on diesel and aviation turbine fuel (ATF). The duty on diesel exports has more than doubled to ₹55.5 per litre from ₹21.5 per litre, while the levy on jet fuel exports has been raised to ₹42 per litre from ₹29.5 per litre.
Nomura believes windfall tax benefits OMCs as standalone refiners may get into agreements with them to sell diesel and ATF at their export realized prices (post windfall tax), directly translating into saving for OMCs by a similar amount on volumes they source from third-party refiners. OMCs, especially HPCL, is anticipated to benefit significantly, as 40 per cent of its diesel retail sales (32 per cent of total refinery throughput) are sourced from standalone refineries. The brokerage estimate current integrated margins for IOCL/BPCL/HPCL at -$2.2/bbl/-$7.3/bbl/- $18.5/bbl at current prices, including the benefit from the higher windfall tax.