OMC stocks crack on US sanctions fears; BPCL falls 4%, HPCL 5%

Shares of oil marketing companies (OMCs) tumbled on Thursday amid talks that US President approved a bill that threatens to raise tariffs on countries buying energy products from Russia to at least 500 per cent. 

 

Bharat Petroleum Corp. (BPCL) stock fell as much as 4.35 per cent to ₹352.2 per share, the steepest decline since June 13 last year. Shares of Indian Oil Corp (IOC) and Hindustan Petroleum Corp (HPCL) dropped 3.3 per cent and 4.9 per cent, respectively. 

 

As of 12:25 PM, BPCL was trading 3.7 per cent lower compared to a 0.78 per cent gain in the Nifty50 index. Shares of IOC and HPCL were down 2.7 per cent and 4.3 per cent. In the last 12 months, BPCL, IOC, and HPCL shares have risen by 24 per cent, 17.6 per cent and 16 per cent, respectively. In the same period, Nifty50 has risen by 10 per cent.

What's dragging OMCs lower?

The US President Donald Trump approved a bipartisan Bill titled the 'Sanctioning of Russia Act 2025', according to US Senator Lindsey Graham. Although the bill has not yet been passed, Graham said it could be brought up for a bipartisan vote as early as next week.

 

“This Bill will allow President Trump to punish those countries who buy cheap Russian oil fuelling Putin’s war machine,” Graham said in a post on X, adding that it would give Trump “tremendous leverage” over India, China and Brazil.

 

The bill in discussion proposes to impose wide-ranging penalties on individuals and entities connected to Russia. One major provision includes increasing duties on all goods and services imported from Russia into the US to at least 500 per cent of their value.

 

Since Russia’s invasion of Ukraine in 2022, India increased its purchases of Russian crude oil due to steep discounts offered by Moscow in view of Western sanctions. Russia became India's largest crude supplier, with Russian oil at times accounting for about 35-40 per cent of India’s total crude imports, up from roughly 0.2 per cent before the war.

JM Financial on OMCs

JM Financial, in a note last week, said that OMC valuations are currently 5-15 per cent above historical averages. Muted crude prices are also likely to cap near-term realisations for upstream companies such as Oil and Natural Gas Corporation and Oil India.

 

That said, the brokerage prefers Oil India from a medium-term perspective, citing a potential 15 per cent earnings compounding over the next two to three years, driven by expected cumulative oil and gas production growth of 20-25 per cent and benefits from the expansion of the Numaligarh Refinery from 3 million tonnes per annum to 9 million tonnes per annum. 

=====  (Disclaimer: The views and investment tips expressed by the brokerage in this article are their own and not those of the website or its management. Business Standard advises users to check with certified experts before taking any investment decisions.)