Shares of oil marketing companies (OMCs) are in focus on Thursday, November 5, as international crude oil prices extended their decline for a fourth consecutive session, raising expectations of improved marketing margins for fuel retailers.
Brent crude futures fell 1.03% to $93.65 per barrel, while US West Texas Intermediate crude declined 1.29% to $86.98 per barrel, after both benchmarks dropped more than 8% in the previous session.
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On Thursday, Nov. 5, at around 11:35 a.m., Hindustan Petroleum Corporation (HPCL) shares surged 6.21% to Rs 389.10, while Bharat Petroleum Corporation (BPCL) gained 3.51% to Rs 315.40. Indian Oil Corporation (IOC) advanced 2.98% to Rs 146.26 on the NSE.
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Why Are Crude Oil Prices Falling?
Oil prices have declined amid expectations of the US-Iran war coming to an end, with the Republican Party losing the US Midterm elections.
Investors are anticipating that reduced geopolitical tensions could help restore disrupted oil supplies from the Middle East. Shipments through the Strait of Hormuz have nearly returned to pre-war levels, adding to expectations of improved supply availability.
How Does Lower Crude Impact OMCs?
A decline in international crude oil prices can benefit IOC, BPCL, and HPCL by reducing their crude procurement costs. This can improve their fuel marketing margins, provided domestic petrol and diesel retail prices remain unchanged.
However, the extent of the benefit will depend on the movement in refined fuel prices, refining margins, and retail selling prices. Any sustained decline in crude prices could also affect inventory valuations.
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