PSU OMCs firm up after crude oil declines

Three PSU OMCs rose by 2.24% to 4% at 11:39 IST on BSE after crude oil fell the most in two weeks on Wednesday, 4 September 2013, as the US considered limiting the scale of military strikes on Syria.

BPCL (up 4%), Indian Oil Corporation (up 3.59%) and HPCL (up 2.24%), edged higher.

The BSE Sensex was up 413.72 points, or 2.23% at 18,981.27.

Crude oil prices declined on Wednesday, 4 September 2013. Light sweet crude oil for October delivery dropped $1.31 to settle at $107.23 a barrel on the New York Mercantile Exchange, the biggest decrease since 20 August 2013.

However, oil prices rose marginally today, 5 September 2013. Benchmark oil for October delivery was up 23 cents to $107.46 in electronic trading on the New York Mercantile Exchange today, 5 September 2013.

Public sector oil marketing companies (PSU OMCs) suffer under recoveries on domestic sale of diesel, LPG and kerosene at controlled prices. In January 2013, the government allowed PSU OMCs to raise diesel prices in small measures at regular intervals while completely deregulating diesel prices sold to institutional or bulk buyers. The government has already freed pricing of petrol.

Meanwhile, a strength in rupee also boosted PSU OMCs. The partially convertible rupee was at 66.10 per dollar compared with its close of 67.0650/0750 on Wednesday.

The strength in rupee has eased concerns about increased costs of importing oil. PSU OMCs import about 70-75% of their crude oil needs and rely heavily on foreign currency borrowings, which largely remain unhedged.

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