OMC Stocks Gain Up to 2 Percent Following BPCL's Positive Commentary on Q4 Results

BPCL Allocates Funds to Boost Crude Oil Ownership Amid Supply Disruptions

Shares of oil marketing companies in India rose by up to 2% on May 20, following Bharat Petroleum Corp Ltd's (BPCL) announcement to allocate funds towards acquiring ownership of at least 6-7 million tonnes per annum of crude oil in the long term. This move comes amid ongoing supply disruptions in the Middle East, attributed to the US-Israeli conflict with Iran.

BPCL's management has been recalibrating its crude import strategy almost daily, with Chairman Sanjay Khanna stating that the company is ramping up spot purchases following the disruptions. India, the world's third-largest oil importer and consumer, has been hit by rising crude prices and supply disruptions following the closure of the Strait of Hormuz. The Indian government has raised the retail prices of petrol and diesel twice in a week.

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

BPCL operates three refineries in India with a capacity to process 706,000 barrels per day of oil. The state-run refiner meets 40-45% of its crude needs with Russian oil bought largely in the spot market after Washington granted sanctions waivers. However, premiums on Russian crude have fallen to $5 to $6 per barrel to dated Brent on a delivered basis from $10 to $12 earlier.

Despite recent fuel price hikes, BPCL continues to incur a revenue loss of 25 to 30 rupees (26 to 31 U.S. cents) per litre on diesel and 10 to 14 rupees per litre on petrol. The company expects spot purchases to ease if Saudi Arabian contracted supplies improve after the restoration of the Kingdom's east-west pipeline capacity. BPCL is also evaluating annual supply deals with new producers for next year if they offer flexible delivery terms and competitive pricing.

BPCL reported a flat net profit in the quarter ended March 31 after it took an impairment loss of Rs 4,349 crore on its upstream assets. The quarterly profit came despite the company suffering huge losses on selling petrol, diesel, and cooking gas LPG below cost in March, as it insulated the domestic market from volatility that hit the international market after the start of the West Asia conflict. The full impact of the ongoing war-driven disruption in global energy markets will be visible in the June quarter.