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 11, amid a surge in global crude oil prices on the ongoing geopolitical tensions between US and Iran. This comes despite OMC stocks were expected to trade positive by D-Street analysts after Prime Minister Narendra Modi on Sunday called for Indians to conserve fuel, avoid unnecessary foreign travel and even postpone non-essential gold purchases amid the rising commodity prices over the Middle-East geopolitical risk.
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 BPCL las traded 2.58% lower at Rs 294.95, IOC traded 2.70% lower at Rs 140.79, and HPCL shares were last down 2.33% lower at Rs 377.90 apiece on the NSE. At the opening bell, Nifty fell as much as 1.15% to 23,897, while the Sensex dropped 1.22%, or about 944 points, to 76,384.65.
The Indian rupee opened weaker against the US dollar and fell as much as 43 paise to 94.91 in early trade. The declines came after the US President Donald Trump rejected Iran's response to a US peace proposal, raising concerns over prolonged conflict in the Persian Gulf. Domestically, markets reacted to remarks by Prime Minister Narendra Modi urging fuel conservation and restraint on gold purchases amid pressure from rising energy prices, adding to concerns around India's external balances.
PM Modi's appeal to Indians amid crude price surge
Speaking at an event in Telangana yesterday, PM Modi urged citizens to use imported petroleum products 'only as per need' in light of the ongoing Middle East crisis. He also revived several Covid-era practices, including work-from-home arrangements, online meetings and virtual conferences, arguing that reducing fuel consumption would help conserve foreign exchange reserves and cushion the economy from the impact of higher crude prices.
Brokerages indicated that stocks such as Indian Oil Corp., Bharat Petroleum Corp. and Hindustan Petroleum Corp. could benefit if demand moderation reduces inventory and pricing pressures. For oil marketing companies, the message was quite positive. Lower fuel consumption may ease the burden of under-recoveries if retail prices remain unchanged while global crude stays elevated. However, the fuel confidence failed to impress investors amid the larger global price shock.
Why are OMC stocks in red?
Global crude oil prices rallied on Monday, a day after US President Donald Trump said Iran's response to a US proposal was "unacceptable," raising supply fears as the Strait of Hormuz stayed largely closed, which kept the global market tight. Brent crude futures climbed $4.16 or 4.11% to $105.45 a barrel. US West Texas Intermediate was at $99.80 a barrel, up $4.38, or 4.59%. Last week, both contracts recorded 6% weekly losses on hopes for an imminent end to the 10-week-old conflict that would allow oil transit through the Strait of Hormuz.
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