OMCs trade weak; BPCL, HPCL, IOCL hit 52-week lows

Shares of all three listed state-owned oil marketing companies (OMCs) hit their respective 52-week low on the BSE on Wednesday in intra-day deals.

Hindustan Petroleum Corporation (HPCL), Bharat Petroleum Corporation (BPCL) and Indian Oil Corporation (IOCL) were down 3% to 4% on the BSE in intra-day trade. On comparison, the S&P BSE Sensex was trading flat at 37,412 points at 09:58 am.

Thus far in the calendar year 2018, HPCL (down 42%), BPCL (down 36%) and IOCL (down 24) have slipped more than 20% against 10% rise in the benchmark index.

Today, the rupee fell another 0.13 paise at open to 72.90 per dollar after closing at Rs 72.69/dollar on Tuesday.

Meanwhile, oil prices rose more than 2% on Tuesday as U.S. sanctions squeezed Iranian crude exports and after U.S. crude oil production in 2019 were forecast to grow at a slower rate than previously expected, prompting supply concerns, the Reuters report suggested.

“Since peaking in Aug-17, HPCL has fallen 52%, while the Nifty is up by 18%. This was mainly due to the inadequate and untimely petrol and diesel retail price hikes, as oil prices surged, and expected subsidy burden. Although, the current gross margins are lower compared to normalised margins, we believe that OMCs will be allowed to make normative margins and recoup margins as they have in the past,” analysts at HDFC Securities said in a report.

In FY18, OMCs were able to maintain their market share in the domestic market (considering all petroleum products), despite stiff competition from the private players. If we consider the product-wise market shares, OMCs lost market share for major products like Motor Spirit (MS) and High Speed Diesel (HSD) while gaining it for LPG and Kerosene, it added.

“Rising crude oil prices during the last three quarters of FY18 and 1QFY19 supported the increase in overall gross refining margins (GRMs) for domestic refineries. However, inventory losses, led by adverse crude price movement during 1QFY18, resulted in a decline in GRMs for the majority of domestic refiners,” according to rating agency India Ratings and Research (Ind-Ra).

Ind-Ra expects GRMs of Indian refiners to remain healthy in the remainder of FY19, on account of the increase in crude oil prices, which resulted in strong inventory gains in 1QFY19.

H P C L 235.20 481.75 -246.55 -51.2
M R P L 73.40 138.60 -65.20 -47.0
C P C L 272.05 457.40 -185.35 -40.5
B P C L 330.35 533.60 -203.25 -38.1
I O C L 146.55 217.38 -70.83 -32.6