Fuel Price Hikes Spark Focus on OMC Stocks

Fuel Prices Rise for Second Time in a Week, OMCs in Focus

Shares of oil marketing companies (OMCs) such as Hindustan Petroleum Corporation Limited, Bharat Petroleum Corporation Limited, and Indian Oil Corporation Limited will remain in focus on Tuesday after petrol and diesel prices were raised for the second time in a week. The stocks were trading under selling pressure in pre-market trade.

Petrol and diesel prices were increased again, with petrol becoming costlier by 87 paise per litre and diesel by 91 paise per litre. In Delhi, petrol prices rose to Rs 98.64 per litre from Rs 97.77 per litre, while diesel prices increased to Rs 91.58 per litre from Rs 90.67 per litre, according to dealers.

The latest increase comes after fuel prices were raised last Friday for the first time in four years, when petrol and diesel rates were hiked by Rs 3 per litre each. The increase in retail fuel prices is expected to help OMCs partly offset losses incurred due to elevated global crude oil prices, as higher retail rates improve marketing margins.

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The companies may also take cues from easing crude oil prices after US President Donald Trump said there was a "very good chance" of a nuclear deal with Iran. Brent crude futures declined more than 2 percent to USD 109.41 a barrel following Trump's remarks on Iran.

Pressure on fuel retailers has been building for weeks. In a report released last month, brokerage firm Kotak Institutional Equities estimated that refiners were facing an additional burden of nearly Rs 27,000 crore every month due to persistently high crude prices.

Comparison of Crude Prices

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India, which imports nearly 85 percent of its crude oil requirement, remains exposed to global energy market disruptions. Crude prices have risen sharply in recent months amid tensions in West Asia and supply concerns around the Strait of Hormuz, a key global oil transit route. State-run Indian Oil Corporation Limited, Hindustan Petroleum Corporation Limited, and Bharat Petroleum Corporation Limited together control more than 90 percent of the country's network of 103,000 fuel stations and generally revise prices in tandem.