OMCs under pressure as Brent tops $100-mark; BPCL, IGL hit 52-week lows

BPCL, HPCL, Indian Oil, Gujarat Gas, Petronet LNG, Indraprastha Gas and Mahanagar Gas are trading 2 per cent to 6 per cent lower on the BSE.

Shares of oil marketing companies (OMC) and city gas distribution players (CGDs) are under pressure, falling up to 6 per cent on the BSE in Thursday’s intra-day trade as oil prices topped the $100 a barrel-mark for the first time since 2014 after Russia ordered military operations in Ukraine and reports emerged of blasts in some major Ukrainian cities.

OMCs - Bharat Petroleum Corporation (BPCL), Hindustan Petroleum Corporation (HPCL), India Oil Corporation (IOC) – and Gujarat Gas, Petronet LNG and Gail (India) from the S&P BSE Oil & Gas index were down in the range of 2 per cent to 5 per cent on the BSE.

At 11:25 am; the BSE Oil & Gas index was 2.3 per cent lower, as compared to a 2.6 per cent decline in the S&P BSE Sensex.

Shares of CGD companies-Indraprastha Gas (IGL) and Mahanagar Gas (MGL) also continued to reel under pressure after the companies reported a disappointing set of numbers for the quarter ended December 2021 (Q3FY22) and amid concerns of aggressive influx of electric vehicles (EVs).

IGL hit a fresh 52-week low of Rs 340, down 6 per cent on the BSE today. In the past three months, it has declined 32 per cent, against a 5 per cent fall in the S&P BSE Sensex. MGL too hit a 52-week low of Rs 715, down 4 per cent. The stock has slipped 24 per cent in the past three months.

BPCL too hit a fresh 52-week low of Rs 343.65, down 4 per cent today and 8 per cent in one week. However, analysts at UBS Securities think BPCL is geared up to address the challenges of energy transition, aided by strong cash flows accruing from efficient marketing and highly complex refining business.

“Management is focused on enhancing petchem integration, and has ambitious plans for scaling up non-fuel retailing. We think there is further scope of earnings upgrade on strong refining margins, and potential improvement of valuation multiples with the right transition theme,” the brokerage firm said in a stock update and reiterated its Buy rating. 

Meanwhile, global oil and liquified natural gas (LNG) prices are likely to see a sharp rise in the event of a Russia-Ukraine conflict, which would have negative implications for net energy importers, Moody's Investors Service said on Wednesday.

"The global price of oil and liquified natural gas (LNG) is likely to rise sharply in the event of a conflict, which will be positive for the relatively few exporters in the Asia Pacific region and negative for the substantially greater number of net energy importers.

"However, a mitigating factor is that several Asian economies have long-term supply contracts in place for LNG, which will limit the impact of fluctuations in the spot price," Moody's Managing Director Michael Taylor said. CLICK HERE FOR FULL REPORT