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Informist, Friday, Apr. 4, 2025

MUMBAI - Analysts expect risks related to reciprocal tariffs by the US to lead to selling pressure on Indian oil companies in the near term. Also, the selling pressure from foreign portfolio investors in companies dealing with oil, gas, and consumable fuels increased in the second half of March compared to the first half. FPIs net sold shares worth INR 24.49 billion of these companies between Mar. 16 and Mar. 31 compared to INR 9.70 billion net sold in the first half of the month, according to data from the National Securities Depository. 

However, the sharp fall in crude oil prices is likely to provide some relief to oil marketing players in the near term, just like this week. A decline in global crude oil prices can boost their profitability as it is a key raw material. Shares of oil refiners saw slight relief even as the overall equity market fell. This followed the decision of eight member nations of the Organization of the Petroleum Exporting Countries and its allies to increase production by 411,000 barrels per day in May, which is more than what market participants had expected.

This led to a sharp fall in global crude oil prices to the lowest level since August 2021. At 1655 IST, the Brent crude June contract traded on the Intercontinental Exchange was down nearly 7% at $65.45 per barrel. The Brent crude was at $73.63 per barrel a week ago. 

Shares of refiners such as Bharat Petroleum Corp. and Indian Oil Corp. rose 0.4% and 2.0%, respectively, this week, while those of Hindustan Petroleum Corp. fell 0.6%. Shares of upstream players fell the most among the oil pack, with Oil India and Oil and Natural Gas Corp. falling 7-8% lower this week. Shares of Reliance Industries fell 5.5% during the week. 

The fall in oil prices amid the economic uncertainty is positive for India, which is a net importer of crude oil. Fall in crude oil prices further strengthens current account deficit and opens room for monetary policy easing, ASK Private Wealth said in a report. 

In the coming weeks, investors are likely to shift their focus to the March quarter earnings, which start by the middle of April. Kotak Institutional Equities expects muted earnings growth for oil and gas companies for the quarter. Though weak volumes are expected for upstream players, realisations are likely to be better. For refining companies, the rise in crude oil prices by 4-5% in rupee terms is likely to hurt, the broking firm said. 

Echoing similar views, Emkay Global Financial Services said margins of oil marketing companies are likely to decline sequentially. The brokerage house anticipates a 40-55% on-quarter fall each in operating profitability of BPCL and HPCL, while that of IOC is likely to see a 20% fall. The March quarter net profit of BPCL is seen at INR 22.2 billion, HPCL at INR 7.6 billion and IOC at INR 19.8 billion, according to Emkay Global. 

TOP HEADLINES
* PRESS:Crude oil imports from US up 67% on mo March, those from Russia up 11%
* Govt fixes Apr gas price at $7.26/mBtu; Apr-Sept price cap at $10.04/mBtu
* IOC cuts ATF price by INR 5,870.54/kl to INR 89,441.18/kl in Delhi
* IOC cuts price of 19-kg LPG cylinder by INR 41 to INR 1,762 in Delhi
* US natural gas stocks rise by 37 bcf in week ended Mar 21, says EIA
* Reliance Ind arm to partner with Europe's BLAST Esports for esports in India

* Eight members of OPEC, allies to increase production by 411,000 bpd in May

Following are the resistance and support levels for the sector's key stocks for next week, as per calculations based on their prices on the National Stock Exchange:

End

US$1 = INR 85.23

Reported by Anjana Therese Antony
Edited by Saji George Titus

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