OMCs Profit May Remain Unhurt If Crude Prices Average At $75–77 Mark, ICICI Securities' Probal Sen Says

Oil marketing companies maintain their profits in case Brent crude prices average around $75–77 a barrel range, said Probal Sen, a senior research analyst, India oil and gas, ICICI Securities.

At this point, the price of $75 for a barrel of Brent crude is still lower than average crude prices seen in financial year 2025. The prices are well below the last four-year average of $81 a barrel. So, the crude oil prices are still manageable from a margin and price perspective, Sen said in his interview with NDTV Profit.

A one-dollar increase in Brent crude prices impacts the margins of oil marketing companies by 53 basis points. Considering the $8 movement, the retail margin will likely be Rs 6 without pass-through, which is well above historical levels, he said.

On June 13, Brent crude's benchmark August contract jumped 13.18% to $78.50 a barrel after Israel launched air strikes in strategic locations of Iran, resulting in the deaths of important commanders and scientists.

After a breather on Monday, crude oil prices rose for a second session on Wednesday. However, on Thursday, crude oil prices continued to erase gains. As of 1:48 p.m.

The current price rise is an expected reaction of the market because of fear of a disruption of Iranian oil supply, Sen said. It is unprecedented what is happening right now. There is uncertainty about potential ramifications in case other countries get involved in the Israel and Iran conflict. It could be possible the impact will likely be more than what was seen during the start of the Russia-Ukraine war.

It is crucial to monitor what happens in the Strait of Hormuz in a couple of weeks for any signs of an actual effect on crude oil supplies. That will determine the direction of crude oil prices, he said.

Nearly 70% of crude oil supplies to Asia pass through the Strait of Hormuz and Bab el-Mandeb Strait. Iran has direct control over the Strait of Hormuz and influence over Bab el-Mandeb Strait through Yemen's Houthi Rebels.

In past conflicts, the Strait of Hormuz has not been blocked, or shipments were not affected. The base case thesis is that the Strait of Hormuz will likely remain untouched because its implications are not limited only to Iran but to the entire Middle East.

In case supply and/or passing of goods gets disrupted from the Strait of Hormuz, it will raise the insurance charges, subsequently increasing prices across the board, he said.

However, everything remains unclear at this point to get a predictable trajectory of crude oil prices, Sen said.