Dipping crude breathes life into refinery stocks

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Mumbai, Jan 14 : Oil and gas sector companies have been basking under the glory of falling international crude oil prices for the last one month.

The stock prices of all the 15 companies housed under the Bombay Stock Exchange’s (BSE) Oil & Gas index have shown a significant rise during the last one month on the back of sustained fall in crude oil prices in the international market, which fell to a 19-month low to $51.05 on January 11.

On December 12, 2006, when the basket price of crude was at $57.41 a barrel, Bharat Petroleum Corporation Ltd (BPCL) was trading at Rs 316.10. However, as on Friday, when the basket price of crude came down to $52.34 a barrel, the share price of BPCL ended the day’s trading at Rs 368.70, a gain of Rs 52.60 or a an increase of 16.64%.

Experts feel that since the demand has not gone up in the winter season in the US, oil prices in the international market may remain at $55 levels.

Ambareesh Baliga, VP, Karvy Stock Broking said, “Lower than expected demand in the winters in the US has helped in the fall of crude prices to a 19-month low. This is a positive for the oil marketing companies. However, because of this, there could be a possibility that retail prices of petroleum products may be slashed, as these (oil refining) companies operate in a controlled environment. This would, in turn, nullify the benefits of lower crude prices”.

The share price of ONGC, the country’s largest oil explorer, closed at Rs 924.85 on Friday. The stock has gained Rs 119.35 or 14.82% as against of Rs 805.50 on December 12. Similarly, Hindustan Petroleum Corporation Ltd (HPCL) share prices rose by 17.77% to close at Rs 304.15 while Essar oil also saw a sharp rise in its share price by 28.67% as compared to December 12 levels.

The dip in crude prices also helped aviation stocks move northwards as 65% of operating expenses of the airline companies are on account of fuel costs.