Market Update: Surge in Oil Marketing Stocks Amid Low Crude Prices

On Monday, shares of major oil marketing companies, including Bharat Petroleum Corporation (BPCL), Hindustan Petroleum Corporation Ltd (HPCL), and Indian Oil Corporation Ltd (IOCL), experienced a noteworthy increase, with prices climbing as much as 3.7% during intraday trading. Analysts predict that the price of Brent crude will stay below $70 per barrel, a trend that bodes well for these companies.

Benefits for Oil Marketing Companies

The operations of BPCL, HPCL, and IOCL revolve around importing crude oil from various international sources and refining it into essential petroleum products such as diesel and petrol. These companies generate revenue through the sale of auto fuels, earning what are known as marketing margins. The current weak crude oil prices are expected to enhance these margins further.

• Strong marketing margin outlook: The anticipated lower crude prices are a boon for earnings.
• Increased margins: Analysts from Antique Stock Broking reveal that the recent drop in crude prices to $64 per barrel—down from a Q4 average of $75—has elevated auto-fuel margins to ₹12 per liter.

Despite the recent excise duty hike effective from April 8, which could bring marketing margins down to ₹10 per liter, this figure is still significantly higher than the FY26 estimate of ₹4.8 per liter.

Future Crude Price Projections

Experts at JM Financial Institutional Securities Ltd highlight that the continued low crude prices may lead to improved auto-fuel marketing margins for oil marketing companies. However, they express caution regarding government actions, which may involve increasing excise duties or adjusting petrol and diesel prices if crude prices remain low.

Several factors are contributing to the downward pressure on crude prices:

• Rising global oil inventories: An increase of 22 million barrels month-on-month in February 2025, with expectations of further rises in March.
• Global supply dynamics: A rise of 590,000 barrels per day month-on-month in March 2025, despite a 150,000 barrels per day reduction in OPEC+ output.

Additionally, analysts suggest that the actual output cuts from OPEC+ might be less than anticipated due to compensatory cuts from countries like Kazakhstan and Iraq.

Positive Outlook for OMCs

Antique Stock Broking emphasizes that sustained weakness in crude prices should result in robust marketing margins, effectively counteracting any short-term refining challenges and losses from LPG—which are expected to decline sharply in the near future. With strong auto-fuel margins, a recovery in gross refining margins (GRM), and relief from LPG losses, oil marketing companies find themselves in a favorable position.

In conclusion, as the market adjusts to these changes, BPCL, HPCL, and IOCL remain well-positioned to capitalize on the current landscape, benefiting from favorable pricing trends and a supportive market environment.