HPCL, BPCL, IOC shares gain up to 2% as Brent crude drops below $74 per barrel
The shares of Indian oil marketing companies (OMC) recorded strong gains after Brent crude oil prices dropped below the $74 per barrel-mark on June 16. This comes after the stocks recorded significant losses as oil prices soared on the back of rising geopolitical tensions in the oil-rich Middle East.
Hindustan Petroleum Corporation Limited (HPCL) shares gained nearly 3 percent from their intraday low to hit a high of Rs 396 apiece. Bharat Petroleum Corporation Limited (BPCL) shares, meanwhile, gained around 2.7 percent from their intraday low to trade at Rs 317 apiece.
Indian Oil Corporation (IOC) shares gained over 2 percent from the day’s low to hit a high of Rs 142 apiece. The three stocks have now snapped their respective two-day losing streak.
The sharp rise in the share prices pushed the Nifty Oil & Gas index up over 1 percent to hover around 11,559 in the afternoon. The positive uptrend in the sector was further fueled by the rise in the shares of Indraprastha Gas (IGL) and Mahanagar Gas (MGL) after reports suggested that the Delhi government is likely to revise its electric vehicle (EV) policy and include a relaxation in the timeline for transitioning from petrol and gas-powered vehicles.
Notably, oil prices had shot up significantly since the end of last week, after Israel carried out what it called "preemptive strikes" against Iran. Israeli Prime Minister Benjamin Netanyahu said the airstrikes were aimed at key parts of Iran's nuclear and military program. Iran retaliated by launching over 100 drones at Israel, raising concerns over a possible full-blown war in the oil-rich Middle East.
The Israel-Iran conflict has now entered its fourth consecutive day. Israel recently struck Fordow nuclear facility in Iran, which triggered a 2.5-magnitude earthquake.
However, analysts have noted that markets and assets like gold and crude oil have been comparatively resilient to the latest developments, and await further triggers. "Interestingly there is no panic in equity markets. Markets will be severely impacted only if Iran closes the Strait of Hormuz triggering a huge spike in crude. This appears to be a low probability event now," VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited, said.
Kaynat Chainwala, AVP-Commodity Research at Kotak Securities, said, "Ongoing military actions between Israel and Iran for a fourth consecutive day continue to stir fears of a broader regional conflict. Meanwhile, unexpectedly strong retail sales data from China provided a temporary relief and lifted market sentiments."
JM Financial, in its latest report, said, "There is a huge upside risk to crude price if Iran is able to disrupt crude supply through the key Strait of Hormuz via which 20% of global oil & LNG shipments takes place. The probability of this, though, is low; the Strait of Hormuz has never been blocked during earlier wars in the region, and its blocking is extremely unlikely this time as well, as US and Western countries are likely to take strong measures against any such disruptions given the huge risk it can pose to global oil and gas prices and, hence, inflation. Brent may remain in $70-80/bbl in the near term amidst heightened geopolitical tensions; however, we expect Brent to stabilise $70/bbl in the medium term once the tensions ease."
The domestic brokerage maintained a 'Buy' rating on ONGC and Oil India, as the oil refiners will likely remain the biggest beneficiaries in case of further rise in prices. It however kept a 'Sell' call on HPCL and IOC, and 'Hold' call on BPCL.Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.