OMC stocks hit new 52-week high ahead of OPEC+ meeting

Oil marketing company (OMC) stocks in Wednesday's session (November 29) traded at new 52-week high as the crucial OPEC+ meet is scheduled for Thursday. In the meeting, the output policy will be decided for the upcoming months.

Crude refiners Indian Oil Corporation (IOC) and HPCL hit their fresh 52-week high for the second consecutive session of Rs 109.49 and Rs 348.4 per share, respectively. On the contrary, BPCL which traded lower ahead of the board meeting, also notched a fresh 52-week high of Rs 434.3. Amid softness in crude prices, HPCL has gained a whopping 41 per cent in a month's time.

In Wednesday's session, oil prices have been rangebound, suggesting investors' cautiousness ahead of the meeting.

Brent crude futures dipped 3 cents to $81.65 a barrel at 0338 GMT. U.S. West Texas Intermediate (WTI) crude futures gained 12 cents, or 0.2%, at $76.53 a barrel.

Both benchmarks gained about 2 per cent on Tuesday on the possibility that the Organization of the Petroleum Exporting Countries and allies such as Russia (OPEC+) will extend or deepen supply cuts, as well as concerns over Kazakh oil output and a weaker US dollar.

Importantly, BPCL in its board meeting today announced a dividend of 210 per cent, amounting to Rs 21 per share for the FY 2024. For the determination  of eligible investors', record date is fixed as December 12. 

Earlier, the company announced an interim dividend of Rs 4 per share, in respect of which the stock traded ex-dividend on August 11.

In FY23, BPCL declared a dividend of 40 per cent amounting to Rs 4 per share, which at the current market price results in a dividend yield of 0.94 per cent.

Outlook for oil prices and buy/sell recommendations from space

"OPEC meetings to extend the supply cuts are scheduled for tomorrow. We expect supply cuts of 2.5 mbpd to continue in CY24, along with voluntary cuts by Saudi Arabia and Russia of 1.3 mbpd. Demand remains strong at 2.4 mbpd for CY23 and will increase by 0.9 in CY24, per IEA. However, supplies from the US and Brazil remain strong, along with higher supplies from Venezuela. Net net, we expect crude prices to remain at $75–90; weakening dollars will also support crude prices," Avishek Datta, Research Analyst, Anand Rathi Institutional Equities, said.

The brokerage prefers upstream players like Oil India and ONGC, given better clarity on realisation and volume growth. OMCs, after a record H1, are likely to report healthy results in Q3 given the improvement in marketing margins of Rs4.5/ltr (Q2: Rs 1.5). 

"BPCL remains our preferred pick in OMCs," the analyst added.