OMCs gain as crude oil prices extend fall; HPCL, BPCL advance 1%

Topics ONGC Oil | Buzzing stocks | Markets

Crude oil prices across the globe are in downtrend on higher supply pressure on swelling inventories
Shares of oil marketing companies (OMCs) were trading firm, while oil exploration companies quoted weak on the BSE on Tuesday after oil prices slumped again overnight on concerns over scarce storage capacity and global economic doldrums from the coronavirus pandemic.

At 09:19 am, Hindustan Petroleum Corporation (HPCL), Bharat Petroleum Corporation (BPCL) and Indian Oil Corporation (IOC) were up 1 per cent each, while upstream companies like Oil and Natural Gas Corporation (ONGC) and OIL India slipped up to 2 per cent on the BSE. The S&P BSE Oil & Gas index was almost flat, as compared to 1 per cent rise in the S&P BSE Sensex.

Crude oil prices across the globe are in downtrend on higher supply pressure on swelling inventories while crude oil demand is at multiyear lows due to stalled world economy.

Oil futures marked their third straight week of losses last week, with Brent ending 24 per cent down and WTI off about 7 per cent. Prices have now fallen for eight of the past nine weeks, a Reuters report suggested.

The June WTI contract’s price fall may have been triggered partly by investors moving to later months after the May contract lapsed into negative territory for the first time before its expiry last week, the report said. CLICK HERE TO READ FULL REPORT

Meanwhile, analysts at Emkay Global Financial Services expect strong oil price recovery towards the end of the year 2020, but this will depend on the timing of easing of lockdowns currently in force worldwide, as well as level of compliance to previously announced production cuts by OPEC+ members.

Analysts at CARE Ratings believe that the fall in crude oil and natural gas price will certainly have an adverse impact on the financial health of the domestic upstream companies. With lower-income and squeezed profitability, we expect these companies to witness pressure on their cash flows and liquidity in the immediate quarters, they said.

“We may witness some improvement in H2FY21, in case of increase in the realization of crude oil backed by supply cut and demand improvement. Furthermore, we may also witness some policy intervention with respect to relaxation in cess and royalty on crude oil given the fact that the domestic import bill will reduce substantially under the current low crude price regime and the Government may decide to pass the benefit to the upstream players as well,” the rating agency said in oil & gas sector update.

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