Fear of jump in oil imports cost shaves 10% off refinery stocks

Our Markets Bureau

New Delhi, Sept 12: Thanks to a spurt in the crude oil price post-US attack, Indian refinery stocks shed up to 10 per cent on Wednesday. Investors liquidated their positions on fears of a jump in the cost of oil imports. Refinery stocks like BPCL, HPCL, Mangalore Refinery and Reliance Petroleum witnessed heavy selling during the day. These stocks shed between 7.19-9.97 per cent on a single day.
Besides, the nervous selling in these counters was also due to the fears that the weakening of the rupee against the dollar might put pressure on the margins of these refinery companies. Since these companies are operating under the administered price mechanism (APM), they may not be able to easily pass on the rise in cost to the customers.

A section of Delhi-based brokers expect that oil prices may go up further although there may be pressure on oil producing countries to maintain stability in oil prices. The crude oil prices shot past $30 a barrel after the terrorist strikes in the US. The political uncertainty in the Middle East has caused the price of oil to surge, according to BBC reports.

However, oil industry officials said that there is no need for panic as supply contracts for most part of November are already in place, according to reports.

Reacting to the government’s stand that the spurt in crude prices may not have much impact on India, a fund manager said: “There are two aspects to this. First is the price and second is the availability. We have already taken care of the price part at least for a couple of months. But what happens if a war breaks out especially when we have not build up a stock position. Also, in such a scenario, the oil production will be in danger. These fears have also led the selling in stocks.”

India imports around 70 per cent of its over 103 million tonne crude requirement. Its crude oil imports were valued at $15.65 billion in the last fiscal.