Shares of IOC, HPCL, BPCL and GAIL rose up to 3 per cent on Wednesday, September 30, as crude oil prices fell. The drop in global oil costs helped these marketing companies improve their margins. Meanwhile, upstream producers like ONGC and Oil India fell as investors tracked changing supply trends.
Shares of oil marketing companies (OMCs), including Indian Oil Corporation (IOC), Hindustan Petroleum Corporation (HPCL) and Bharat Petroleum Corporation (BPCL), gained up to 3 per cent in intraday trade on Wednesday, September 30, as crude oil prices declined. GAIL, Petronet LNG, Indraprastha Gas and Reliance Industries also advanced during the session, while upstream oil producers ONGC and Oil India traded lower.
The gains in oil marketing stocks came after crude oil prices recorded their biggest decline in more than a week, falling 2.5 per cent on Tuesday. At the same time, Brent crude, the international benchmark, was trading near $103 per barrel on Wednesday morning.
The decline in crude oil prices has supported shares of oil marketing companies, as lower input costs can improve their marketing margins on petrol and diesel sales. The fall in international oil prices came amid signs of improving supplies from the Middle East, easing some concerns over disruptions to global crude shipments.
Crude oil prices dropped 2.5 per cent on Tuesday, marking their biggest fall in more than a week. The decline followed signs that Middle East oil supplies had recovered to near pre-war levels, with Saudi Arabia resuming shipments from its Red Sea port of Yanbu. The route allows oil shipments to bypass the Strait of Hormuz.
Brent crude was trading near $103 per barrel on Wednesday morning, following the previous session's decline.
Lower crude prices generally benefit oil marketing companies such as IOC, BPCL and HPCL, as they can reduce their crude procurement costs and support marketing margins, depending on retail fuel prices and other operating factors.
While oil marketing companies gained, shares of upstream exploration and production companies came under pressure. ONGC shares declined around 1 per cent, while Oil India fell nearly 3 per cent in intraday trade.
Unlike oil marketing companies, upstream producers tend to benefit from higher crude prices, as their realisations and revenues are linked to the price of oil. A decline in crude prices can therefore weigh on their earnings outlook.
The divergent movement in oil and gas stocks on Wednesday reflected the different impact of crude price fluctuations on companies across the energy value chain. Lower oil prices supported sentiment towards fuel retailers, while weighing on exploration and production companies.
Investors continued to track crude oil prices and developments in Middle East supplies for further cues on the sector's performance.