HPCL, BPCL, IOC shares slashes up to 6% on crude oil rebound amidst Middle East tensions

by Psu Connect
Date: 04-10-24

The winning streak for HPCL shares has ended after eight days, while BPCL and IOC have experienced a second consecutive day of decline.

New Delhi: The shares of state-run oil marketing companies, Hindustan Petroleum Corporation Ltd. (HPCL), and Bharat Petroleum and Indian Oil Corporation Ltd. (IOC) are trading with losses of as much as 6% on Thursday, October 3.

The winning streak for HPCL shares has ended after eight days, while BPCL and IOC have experienced a second consecutive day of decline.

Despite the recent decrease, HPCL and BPCL have seen gains of nearly 57% and 55% respectively so far this year. Indian Oil's shares have risen 32% in 2024, but have underperformed compared to its peers.

Crude oil prices edged up on Wednesday on worries that the escalating conflict in the Middle East could threaten oil supplies from the world's top-producing region, but a large build in US crude inventories limited gains.

Brent futures rose 34 cents, or 0.46%, to settle at $73.90 per barrel. US West Texas Intermediate crude climbed 27 cents, or 0.39%, to settle at $70.10 per barrel.

According to JM Financial, the recent decline in Oil India and ONGC share prices on the back of a fall in crude price is an opportunity to 'Buy'; however, the brokerage firm remains cautious on OMCs as the recent spike in their marketing margin is unlikely to sustain.

Former chairman and managing director of Hindustan Petroleum Corporation Ltd., Mukesh Kumar Surana said the situation concerning crude oil prices changed substantially in the last 3-4 days.

The brokerage has maintained a 'Buy' on Oil India, with a price target of Rs 720 per share, and also ONGC with a target of Rs 340, given a robust 30% and 15% production growth outlook in the next 1-3 years; Oil India also benefits from lucrative NRL capacity expansion.

However, JM Financial believes that OMCs' risk-reward still appears unfavorable as the current market price is discounting gross marketing margin to be significantly higher than the historical average of Rs 3.5 per liter and is ignoring OMCs' aggressive capex plans.

The brokerage has maintained a 'Sell' rating on HPCL, with a target price of Rs 290, and IOCL Rs 150 per share, and a 'Hold' rating on BPCL, with a target of Rs 290.