After witnessing a jump in share price at the start of the week, oil marketing companies like Bharat Petroleum Corporation Limited (BPCL), Hindustan Petroleum Corporation Limited (HPCL), and Indian Oil Corporation (IOC) were trading in the red on Wednesday.
After witnessing a jump in share price at the start of the week, oil marketing companies like Bharat Petroleum Corporation Limited (BPCL), Hindustan Petroleum Corporation Limited (HPCL), and Indian Oil Corporation (IOC) were trading in the red on Wednesday. Crude oil prices rose for the second day straight as hopes of a cut in output by US producers rose. HPCL share price slumped 1.7 per cent; BPCL was down 3.2 per cent and IOC slipped 2 per cent. Oil marketing companies surged up to 10 per cent on Monday morning after crude oil prices saw their worst fall since the gulf war.
Brent crude futures were up 3.4 per cent, taking the price to $38.48 per barrel. While the US West Texas Intermediate (WTI) crude gained 2.7 per cent to $35.27 per barrel, recouping some of the losses made on Monday. However, unlike Monday’s trading session ONGC was trading in line with oil marketing companies, losing 3 per cent.
“Notwithstanding the Q4 inventory losses, OMCs should benefit from a healthy marketing scenario, lower refining fuel & loss costs and working capital release. Upstream will see material earnings decline and GAIL’s US LNG margins and LPG realization will also suffer,” said analysts at Emkay Global Financial Services. Some coordination between key players in the energy space is expected to calm the price volatility. The brokerage has cut target price for ONGC and Oil India by 33 per cent and has also slashed the EPS for this fiscal for BPCL, HPCL and IOC by more than 35 per cent.
Emkay has put a buy call on oil marketing companies like HPCL, BPCl and Indian Oil. While an upside of 53 per cent is being seen on HPCL, the brokerage expects BPCL to reach a price of Rs 570 per share with an upside of 34 per cent. For IOC, the scrip is expected to touch a target price of Rs 140 with an upside of 40 per cent.