OMC stocks gain as crude oil prices retreat nearly 10% in past 8 days; HPCL zooms 15% in 2 days

Shares of oil marketing companies (OMCs) in trade on November 8 rallied as oil prices retreated to over a 3-month low. 

As per a Reuters report, oil prices on the previous day fell over 4 per cent as mixed Chinese economic data and rising OPEC exports eased fears about tight markets and as the dollar strengthened. A sharp decline in Chinese imports, exacerbated concerns about oil demand, and consequently triggered a heavy sell-off in the crude oil market. Furthermore, weakness in the Asian and European markets, coupled with recession fears in the Eurozone, weighed on crude oil prices.

Shares of HPCL emerged as the top gainer (up 6.87 per cent) and scaled the day’s high price of Rs 300.2. Meanwhile, BPCL gained over 2 per cent, marking the day’s high of Rs 380.9, while IOC moved higher by 2.74 per cent and hit a fresh 52-week high of Rs 106.9.

Analysts attribute sharp gains in the shares of HPCL to the decline in crude oil prices which have tanked nearly 10 per cent in the last 8 sessions. Alongside, post the quarterly numbers, 2 global brokerages have upgraded their stance on the stock. Morgan Stanley has upgraded the stock to 'overweight' from the previous 'underweight' call with a raised target price of Rs 364 versus Rs 249 earlier. Likewise, CLSA has upgraded HPCL to a 'buy' from the earlier 'accumulate' with a higher target price of Rs 345 in comparison to Rs 300 earlier. Nevertheless, Nomura has retained its 'neutral' call with a raised target price of Rs 305.

Among, upstream companies, ONGC traded marginally higher at Rs 193.35 after logging a 5-year high in the previous session. The company is set to report its September quarterly numbers on Friday, November 10, while Oil India traded 0.4 per cent higher at Rs 312.85 on the NSE. At around 9:40 am, Nifty Oil and Gas index was up 0.86 per cent.

Other stocks including the likes of Petronet LNG and Indraprastha Gas traded with a cut of up to 1 per cent. 

Brent crude futures closed below $84 a barrel for the first time since Hamas Islamists' Oct. 7 attack on Israel. The global benchmark settled at $81.61 a barrel, down $3.57, or 4.2%, while U.S. West Texas Intermediate crude futures settled at $77.37 a barrel, down $3.45, or 4.3%, added the Reuters report.

Rahul Kalantri, Vice President-Commodities, Mehta Equities anticipates continued volatility in crude oil prices in today's trading session. Crude oil finds support at $76.30-$75.50, with resistance at $78.10-$78.80. In rupee terms, crude oil encounters support at Rs 6,440-Rs 6,350, while resistance lies at Rs 6,575-Rs 6,660.

Buying action is triggered in OMC stocks after players in the industry have reported a good set of numbers during the July-September period. HPCL during Q2 returned to profitability on margin boost and reported a consolidated net profit of Rs 5,827 crore as against a loss of Rs 2,476 crore in the year-ago quarter. Average GRMs (gross of export duty) for Q2FY24 were $ 13.33 per barrel, against $ 8.41 per barrel during the corresponding period of the previous year.

Indian Oil Corporation (IOC) on the back of robust average gross refining margin (GRM) also posted a net profit at Rs 13,713 crore during the Q2 period as against a loss of Rs 910 crore in the same period last. The stock has been rallying for 9 straight days and during the span has gained 22 per cent.