The Indian stock market witnessed a surge in oil marketing company (OMC) stocks on March 6, 2025, as Brent crude oil prices plummeted below the $70 per barrel mark, the lowest in three years. This development has created a favorable environment for companies such as Bharat Petroleum Corporation Ltd (BPCL), Hindustan Petroleum Corporation Ltd (HPCL), and Indian Oil Corporation Ltd (IOC). However, upstream producers like Oil and Natural Gas Corporation (ONGC) and Oil India might face margin pressures due to lower crude realizations.
OMC Stocks Surge Amid Falling Crude Prices
As crude oil prices dipped, shares of OMCs registered notable gains. HPCL rose 4.21% to trade at ₹340.20, BPCL advanced 3.60% to ₹265.10, and IOC climbed 2.94% to ₹125.85. Analysts suggest that every $1 per barrel reduction in crude prices increases retail fuel margins by ₹0.5 per litre, making the recent price dip highly beneficial for OMCs.
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According to ICICI Securities, the $4–5 per barrel decline in product prices could enhance blended retail margins by over ₹2.5 per litre, significantly boosting earnings for OMCs. Emkay Global Financial Services described the current scenario as a “sweet spot” for OMCs, given the improved marketing margins and potential government support through LPG subsidies.
Upstream Companies Face Earnings Pressure
While OMCs stand to gain from lower crude prices, upstream producers such as ONGC and Oil India are expected to witness margin pressure. ONGC shares slipped 1.76% to ₹233.20, while Oil India traded 0.26% lower at ₹367.25. Emkay Global anticipates a 6-9% reduction in earnings for these companies if crude prices stabilize in the $70-75 per barrel range.
Despite the anticipated earnings cut, brokerages remain positive on ONGC and Oil India due to robust production growth projections. ONGC’s oil output rose by 1.5% year-on-year in January, driven by its KG 98/2 asset, while Oil India’s gas production increased by 7% during the same period.
GAIL’s Petrochemical Business Under Pressure
GAIL India also faces challenges from lower crude prices, as its petrochemical realizations are oil-linked. Shares of GAIL rose 1.66% to ₹161.75, with analysts predicting a 5-6% earnings cut due to weaker petrochemical margins and shrinking spreads in U.S. LNG sales.
However, Emkay Global remains positive on GAIL, citing the upcoming pipeline tariff hike as a key trigger for future growth. The brokerage believes that GAIL’s current valuations are attractive despite near-term headwinds.
Sector Outlook: Favorable for OMCs Despite Crude Volatility
Market experts believe that India’s OMCs are well-positioned to benefit from the current decline in crude prices. The combination of higher marketing margins, government subsidies, and reasonable valuations makes BPCL, HPCL, and IOC attractive investment options.
On the other hand, upstream producers and gas companies may experience temporary margin pressures. However, strong production growth and strategic initiatives like pipeline tariff hikes are expected to support their long-term prospects.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors are advised to consult certified experts before making any financial decisions.