OMC stocks on uptrend over lower crude oil prices; IOC hits 52-week high
Shares of Indian oil marketing companies (OMCs) are on an uptrend as noted in the last few sessions over the declining prices of international crude oil as investors expect limited effects of supply cuts announced by the Organistation of Petroleum Exporting Countries and its allies (OPEC+).
Shares of Indian Oil Corporation (IOC) gained 3.5 per cent on Friday, December 15, to hit its new 52-week high mark of ₹124.95 apiece on the BSE. Bharat Petroleum Corporation Limited (BPCL) also gained nearly two per cent today to settle at ₹448.90 apiece on the BSE.
Domestic brokerage firm JM Financials said in its latest report that OMCs’ gross auto-fuel marketing margin has jumped to ₹7.9 per litre compared to the historical margin of ₹3.5 per litre and gross auto-fuel integrated margin has risen to ₹16.8 per litre compared to the historical margin of ₹11.3 per litre.
The brokerage had also highlighted that OMCs in India will find support with international crude oil prices sustaining below the $80 per barrel mark in the near-term. Upstream oil explorers including Oil India and Oil and Natural Gas Corporation (ONGC) will be the key beneficiaries of low crude oil prices.
‘’Optimism on OMCs will be contingent on crude sustaining below ~$80/bbl with OMCs’ FY24 P/B valuations (at ~0.9x for HPCL/IOCL and 1.1x for BPCL) being only 10 per cent discount to historical average after recent rally,” said JM Financials.
Oil Prices Today
Brent crude futures turned positive during a see-saw session, in which it fell more than $1 a barrel at one point on Friday, as traders tried to reconcile signals for oil demand in the coming year.
Brent futures fell 16 cents, or 0.21 per cent, to $76.46 a barrel. US West Texas Intermediate (WTI) crude fell 29 cents, or 0.41 per cent, to $71.29, according to news agency Reuters.
The dollar fell to a four-month low on Thursday after the US central bank indicated interest rate hikes have likely ended and lower borrowing costs are coming in 2024. The dollar index was broadly steady on Friday.
A weaker dollar makes dollar-denominated oil cheaper for foreign buyers. World oil consumption will rise by 1.1 million barrels per day (bpd) in 2024, the International Energy Agency said in a monthly report.
While that was up 130,000 bpd from its previous forecast, the estimate is less than half of the OPEC demand growth forecast of 2.25 million bpd. OPEC+ in late November agreed voluntary cuts of about 2.2 million bpd lasting throughout the first quarter.
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Published: 15 Dec 2023, 09:53 PM IST
