The recent surge in oil prices is posing a challenge for Indian oil marketing companies (OMCs). Shares of Bharat Petroleum Corporation Ltd. (BPCL), Hindustan Petroleum Corporation Ltd. (HPCL) and Indian Oil Corporation Ltd. (IOCL) declined sharply on Thursday, amid rising tensions in the Middle East following the Israel-Iran conflict. Growing concerns over oil supply disruptions further weighed down the overall investor sentiment.
At 12:25 pm, BPCL shares were trading at ₹321.60 price level, down by 3.67% on the National Stock Exchange. HPCL and IOCL shares followed suit, declining by nearly 5% and 0.93%, respectively.
On a year-to-date basis, BPCL shares have surged over 9.13%. However, HPCL's share price has remained under pressure, declining by 4.28%.
Crude oil prices have already touched their highest levels in the past 2 months. According to a report by Reuters, the US is planning to evacuate its Iraqi embassy as tensions between Iran and Israel continue to escalate. POTUS even called the region a "dangerous place".
“They (US personnel) are being moved out (of some countries of the Middle East) because it could be a dangerous place, and we will see what happens...We have given notice to move out,” US President Trump reportedly said in a media briefing.
Rising tensions in the Middle East might not bode well for Indian OMCs, as an increase in Brent crude prices could squeeze refining margins and elevate input costs.
However, domestic upstream oil companies witnessed a contrasting trend as the shares of Oil and Natural Gas Corporation (ONGC) and Oil India climbed on bourses.
The upward trend in oil prices often bodes well for upstream companies, owing to the higher realisation from selling refined products.
So far this year, the Nifty oil and gas has surged over 8.22%. In comparison, the benchmark Nifty50 index soared over 5.53%.
Oil prices have remained volatile for much of the year. OPEC's recent production hike, despite falling prices, has further added downward pressure. However, recent tensions in the Middle East might push price levels higher in the near-term.
