OMC shares fall as crude oil rises

Rising crude oil prices are again taking a toll on share prices of domestic oil marketing companies (OMCs).

With the crude oil futures index on the New York Mercantile Exchange around $90 per barrel, the share prices of Hindustan Petroleum Corporation, Bharat Petroleum and Indian Oil Corporation have fallen by 6-11 per cent in one month.

This is in sharp contrast to the 7 per cent rise of the Sensex, the benchmark equity index of the Bombay Stock Exchange, during the period.

Analysts say investors start moving away from OMC stocks when crude oil prices rise. This is due to the fear that under-recoveries of these companies will rise, as retail prices of petrol, diesel and kerosene are controlled.

“The under-recoveries of OMCs were around Rs 30,000 crore when crude oil was around $70. However, the under-recoveries could be between Rs 42,000 crore and Rs 45,000 crore. OMCs are suffering a loss of around Rs 6 on every litre of petrol they sell and this is the reason the stocks of these companies are cooling off,” said SP Tulsian, independent equity advisor.

In 2008, when crude oil prices went as high as $150 per barrel, OMCs had to shut some retail outlets. It has been over a month since the Kirit Parikh committee report on pricing of petroleum products was submitted. The government is yet to accept any of its suggestions to decontrol fuel prices.

On the BSE, the Hindustan Petroleum was last traded at Rs 307, Bharat Petroleum at Rs 508 and Indian Oil Corporation at Rs 293.