OMC stocks close higher as oil prices cool over easing middle-east tensions

Oil prices slipped over 1% on Monday after the risk of escalation of conflict between Israel and Iran eased and focus turned towards the commodity’s fundamentals, a April 22 Reuters report said. Shares of oil marketing companies (OMCs) gained with Hindustan Petroleum Corp (HPCL) and Indian Oil Corporation (IOC) rising over 2.5% and Bharat Petroleum Corporation (BPCL) shares closing over 3% higher.

Futures of Brent crude, the global benchmark, were trading at $86.77/barrel on Monday, down from the highs of $88.88/barrel seen on Friday. At the same time, West Texas Intermediate futures were trading at $82.83/barrel.

Meanwhile, U.S. crude inventories rose by 2.7 million barrels, the report said citing the Energy Information Administration data. At the same time, there has been increasing calls for a delay in the timeline of potential rate cuts given the fact that the progress on controlling inflation has slowed down. As the Federal Reserve keeps interest rates higher for longer, the dollar continues to be strong. Rising inventories and a strong dollar put pressure on oil prices as the strength of the greenback makes the commodity dearer for other currency-holders.

However, tensions in the middle-east are far from over. An Iraqi military base blast on Saturday killed a member of a security force that included Iran-backed groups, the report pointed out. Separately, Hezbollah claimed on Sunday it downed an Israeli drone in southern Lebanon, the report said.

According to a media reports, every $1 increase in crude prices could dent the margins of oil marketing companies by 30-40 paise per litre. India’s fuel demand for the fiscal year rose 5% to a record high of 233.276 million tons compared to 223.021 million tons a year earlier, driven by higher automotive fuel and naphtha sales, a media report cited.

HPCL shares have gained over 23% since the beginning of the year while BPCL and IOC shares have risen over 31% during the period.