Why have HPCL, BPCL, IOC dipped despite fuel price hike? Analysts explain

Public sector OMCs, including Indian Oil, BPCL, and HPCL, have been incurring losses of about ₹20 per litre on petrol and nearly ₹100 per litre on diesel due to elevated global crude prices

Shares of three-major state run oil marketing companies (OMCs) including Hindustal Petroleum Corporation (HPCL), Bharat Petroleum Corporation (BPCL), and Indian Oil Corporation (IOCL) were trading sharply lower on Friday, May 15 after after the prices of petrol and diesel were hiked by around ₹3 per litre across the four metro cities, in line with the recent surge in global energy prices. 

 

Around 09:30 AM, shares of Hindustan Petroleum were trading at ₹368.75, down 2.33 per cent from the previous session's close of ₹377.55. Bharat Petroleum was down 1.4 per cent at ₹291, and the Indian Oil stock fell over 1 per cent to a low of ₹138.64. In comparison, the benchmark NSE Nifty50 index was trading at 23,787.35 levels, up by 97.75 points or 0.41 per cent.   The Nifty Oil & Gas index was quoting at 11,318 levels, down by 1.2 per cent. 

 

 

Following the revision, petrol and diesel prices in the national capital now stand at ₹97.77 and ₹90.67 per litre, respectively. In Kolkata and Chennai, petrol prices have increased to ₹108.74 and ₹103.67 per litre from ₹105.45 and ₹100.80 earlier. Diesel prices in the two cities have risen to ₹95.13 and ₹95.25 per litre, respectively.

Here's why OMC stocks are falling:

According to the government, public sector OMCs, including Indian Oil, Bharat Petroleum, and Hindustan Petroleum, have been incurring losses of about ₹20 per litre on petrol and nearly ₹100 per litre on diesel due to elevated global crude prices and unchanged domestic retail rates.

 

​G Chokkalingam, founder and head of research at Equinomics Research, said that the hike in petrol and diesel prices is not enough to fully resolve the problems that OMCs are facing. He noted that while the price hike is a positive step, it is insufficient given that crude oil prices have surged by 70 per cent over the last year. 

Sharing similar views, Deven Choksey, managing director at DRChoksey FinServ, said as for whether the current hike is sufficient, it is not enough for companies to fully cover their losses. This seems more like a temporary relief measure.

 

"If prices were increased sharply all at once, there would be strong public backlash. So, companies may be allowing consumers to gradually absorb the increase before possibly implementing another round of hikes later" he added. 

​

According to Chokkalingam, while oil price volatility may offer tactical opportunities in the short term, the medium-to-long-term outlook for OMC stocks remains cautious. The government must balance the interests of the public and the exchequer; the corporate entities often bear the brunt of the pain in the long run, regardless of whether oil prices rise or fall.

 

Global oil prices had surged above $120 per barrel amid disruption and closure risks in the Strait of Hormuz following the US-Israeli strikes on Iran, before easing to the $100–105 range. 

 

Last checked, the Brent crude was up by 1.3 per cent to $107 per barrel, and the US West Texas Intermediate (WTI) crude rose 1.34 per cent to $102.52. 

 

India remains among the last major economies to adjust retail fuel prices upward. This comes after Prime Minister Narendra Modi on Sunday called for measures such as fuel conservation, work-from-home adoption, and reduced travel and imports, as rising global energy costs continue to pressure India’s foreign exchange reserves.  =============  Disclaimer: View and outlook shared belong to the respective brokerages/analysts and are not endorsed by Business Standard. Readers' discretion is advised.