- Shares of Indian Oil, BPCL, and HPCL fell nearly 2% in early trade on May 18
- Brent crude futures rose $2.03 to $111.29 a barrel, highest since May 5
- Geopolitical tensions between the US and Iran drove the crude oil price surge
Shares of India's state-run oil marketing companies (OMCs) Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd, and Hindustan Petroleum Corp Ltd, tumbled in early trade on Monday, May 18, amid a surge in global crude oil prices on the ongoing geopolitical tensions between US and Iran. Global crude oil prices extended gains as week-long efforts by leading mediators to end the Iran war appeared to have stalled, after a nuclear power plant in the United Arab Emirates came under attack.
Shares of IOCL, BPCL, and HPCL opened nearly 2% lower each and extended losses to trade in red amid a broader bearish sentiment across the domestic frontline indices. On the NSE, shares of HPCL las traded 2.21% lower at Rs 358.30, IOC traded 2.42% lower at Rs 131.22, and BPCL shares were last down 2.57% lower at Rs 257.15 apiece on the NSE. After the opening bell, benchmark Nifty 50 fell as much as 1.15% to 23,371.80, while the Sensex dropped 1.22%, or about 892 points, to 74,345.
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Crude Oil Prices
Brent crude futures climbed $2.03, or 1.86%, to $111.29 a barrel, after touching $112 earlier, the highest since May 5. US West Texas Intermediate crude stood at $107.75 a barrel, up $2.33, or 2.21%, after a rise to $108.70, its highest since April 30. The front-month June contract expires on Tuesday. Both contracts gained more than 7% last week as hopes dimmed for a peace deal to end ship attacks and seizures around the key waterway of the Strait of Hormuz.
Last week's talks between Trump and Chinese President Xi Jinping ended without an indication from the world's top oil importer that it would help resolve the conflict unleashed by the US-Israeli attacks on Iran. Drone attacks on the UAE and Saudi Arabia and rhetoric from the United States and Iran raised concerns of an escalation in the conflict. Trump is expected to meet national security advisers on Tuesday to discuss options for military action, media outlet Axios reported on Sunday, citing US officials.
ALSO READ: US-Iran Peace Negotiations To Restart? Pakistan Shares Tehran's Revised Proposal With US
Should you buy or sell OMC stocks?
According to domestic brokerage Elara Securities, the Rs 3/liter fuel price hike is a positive first step and would reduce annualized gasoline/diesel integrated losses by Rs 345 billion, but OMCs' earnings would remain under pressure. Unless crude corrects, further retail price hikes or additional fiscal support would be required. Within OMCs, IOCL is better placed due to stronger refining integration, while HPCL and BPCL remain more exposed to marketing losses, as per Elara.
''For the sector, this reinforces our view that OMC stocks will be driven less by reported Q4 numbers and more by the pace of price hikes, crude trajectory and government support,'' said analysts. HPCL is the most vulnerable OMC because of its higher retail marketing exposure relative to refining capacity. ''Our recent HPCL note on Q4FY26 earnings highlighted that Q1FY27 would be challenging due to expensive crude, low product prices and high volatility,'' said Elara Securities.
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