BPCL, IOCL To HPCL: Oil Stocks Plummet 9% After Crude Price Spike Amid Israel-Iran War

The shares of oil marketing companies (OMCs) BPCL, HPCL, and IOCL were under pressure in Monday's trading session after the crude prices breached the $100 per barrel mark amid the ongoing supply chain disruptions in Strait of Hormuz triggered by the Israel-US-Iran war.

The brent crude prices surged as much as 29% intraday, raising fears that under recoveries increase sharply in the absence of fuel price rise and weigh on their bottom lines.

The BPCL stock plummeted 8.43% to hit an intra-day low of Rs 322.95 apiece, HPCL shares fell 8.67% to Rs 370.10 per share, and IOCL shares declined to 156.30 apiece on BSE.

Meanwhile, the global brokerage house UBS on Monday likened the recent surge in crude oil prices and refining margins to the oil market crisis in 2022. Further, it downgraded both IOCL and BCL to 'neutral', and HPCL to 'sell'.

Also Read: Oil Surges Over 25%, On Track For Record Daily Jump Due To Iran War

"Integrated (refining + marketing) margins for Indian SOE oil marketing companies (OMCs) are negatively levered to increases in crude prices given limited scope of retail fuel price/ taxation changes, further impacted by FX depreciation (USDINR at 92 vs 79 in CY22). OMCs' higher leverage to marketing also means they lose out if profits shift from marketing to refining," UBS said.

The brokerage firm also lowered its target price for IOCL to Rs 175 from Rs 190, meanwhile BPCL's target was reduced to Rs 365 from Rs 425 and HPCL's to Rs 340 from Rs 540.

The foreign brokerage lowered its FY27 and FY28 marketing margin estimates by 43-45 per cent and 22-26 per cent and raise FY27 and FY28 gross refinery margins (GRMs) by 30-48 per cent and 21-39 per cent, respectively.

Meanwhile, stock market expert Sunil Shah noted, "Unless the crude oil prices go back to $75 and unless the situation in West Asia is diffused and there is some kind of agreement, it is very difficult for the market to go up from here because we may see some kind of technical rebound in between, but the undertone is bearish."