OMCs gain sharply by up to 5%; CLSA says rising crude is negative trigger

Global brokerage CLSA on the oil marketing companies (OMCs) said that rising crude and falling margins going ahead will be detrimental for OMCs ahead of the election. It stated that the move will be a negative trigger for all of the OMCs such as Indian Oil Corporation, HPCL, and BPCL.
 
Crude prices have gained substantially of late and are trading above the US$88 per barrel price level. In trade today, oil prices held steady as worries pertaining to tighter supply due to uncertainty over Gaza ceasefire talks were offset by a bigger-than-expected build in US crude inventories. Brent crude futures were flat at $89.42 per barrel at 0010 GMT, while US West Texas Intermediate (WTI) crude futures rose 2 cents to $85.25.
 
Even though crude prices climb near the $90 per bbl mark, all three OMCs are trading with sharp gains of up to 4 per cent, with HPCL leading the gains.
 
Further, CLSA stated that marketing margins on diesel were positive in 4Q versus 3Q, while petrol margins saw slight moderation. Additionally, integrated margins for oil marketing companies indicate a strong finish to FY24, with 4Q margins notably above the last two quarters.
 
Besides, a 2 per cent cut in fuel prices in March, coupled with a continued rise in crude prices, has been hitting the marketing margins of these companies. Above the US$88/bbl Brent price, IOCL, BPCL, and HPCL are now making negative marketing margins on retail fuels, CLSA said.
 
A lack of pricing freedom amidst rising crude prices ahead of the elections would be a negative trigger for IOCL, BPCL, and HPCL, it added.
 
OMCs logged healthy gains and reaped significant returns for their investors as they got support from crude oil prices sustaining below the $80 per barrel mark.