Indian Oil, HPCL, BPCL: OMCs shares tank 6% as oil prices surge over the $100/bbl mark amid Iran war

Crude oil prices surged over the $100 per bbl mark as the West Asia conflict entered its third week on Monday. Over the weekend, the United States attacked Iran’s key oil export hub, Kharg Island, according to media reports.

Crude oil prices surge over the $100 per bbl mark

Contracts for West Texas Index (WTI) for delivery in April advanced as much as 3.78% to an intraday high of $102.44 per bbl on March 16. Meanwhile, Brent Crude futures (expiry in May) jumped as much as 3.26% to the session’s peak of $106.50 per bbl.

What analysts said

Analysts at HSBC said that higher crude oil prices could lead to sharp cuts in earnings for OMCs, and they expect marketing losses even with oil at $75 per bbl.

In a note, analysts at Elara Capital stated that the crude shock has been driving earnings divergence across the oil sector. They expect that the OMCs' earnings before interest, tax, depreciation, and amortisation (EBITDA) could collapse by more than 400% in extreme scenarios.

As per the analysts, while standalone refiners could expect a 10 to 15 times EBITDA expansion, every $10 crude rise cuts the fuel margin for OMCs by ₹6.3 per litre.

OMCs share performance

The stock of IOC slumped as much as 6.17% to an intraday low of ₹146.88 per equity share on the National Stock Exchange (NSE) on Monday. At around 2:32 PM, it was trading 4.68% lower at ₹149.21 apiece.

Shares of HPCL fell as much as 5.54% to the session’s low of ₹348.30 per unit. It stood at ₹352.90 apiece, down by 4.30% at the time of writing.

The scrip of BPCL declined by 6% to touch the day’s trough of ₹301.10 apiece. At the time of writing, it was trading 4.35% lower at ₹305.40 per unit.