BPCL, HPCL fall as caution returns; Strait of Hormuz reopening uncertainty weighs on OMC stocks

Mumbai, April 9:Shares of state-run oil marketing companies (OMCs) came under pressure on Thursday, with Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corporation Limited (HPCL) declining, as investors turned cautious over the uncertain reopening of the strategically critical Strait of Hormuz.

BPCL edged lower by 0.23% at Rs 297.40 while HPCL was down 1.92% at Rs 357.25 on NSE as of 2:15 pm. Indian Oil Corporation declined 1.35% at Rs 141.42.

The weakness in OMC stocks comes just a day after a sharp rally in the sector, triggered by a steep fall in global crude oil prices following a temporary ceasefire announcement between the US and Iran. However, the optimism proved short-lived as concerns resurfaced over whether the ceasefire—and the subsequent reopening of the key oil transit route—would hold.

Conflicting signals

Market participants said conflicting signals ahead of scheduled US-Iran talks have raised doubts about the durability of the truce. Reports of potential retaliation warnings from Tehran have further heightened uncertainty, prompting investors to book profits in OMC stocks after the previoussession’s gains.

The Strait of Hormuz, a vital chokepoint through which nearly a fifth of the world’s oil supply passes, has been at the centre of recent geopolitical tensions. Disruptions in the region had earlier driven crude prices sharply higher, while news of a ceasefire and partial reopening led to a steep correction in oil prices and a rally in downstream stocks.

Crude impact

For oil marketing companies such as BPCL and HPCL, crude price movements have a direct impact on margins. Lower crude prices typically benefit refiners and fuel retailers by reducing input costs, while higher prices or volatility can compress margins, particularly when retail fuel prices are regulated.

The latest decline in OMC shares suggests that investors are now factoring in the risk of renewed volatility in oil markets. While crude prices have cooled from recent highs, analysts warn that any disruption in supply or breakdown of the ceasefire could quickly reverse the trend.

Adding to the uncertainty is the broader geopolitical backdrop in West Asia, where tensions remain elevated despite diplomatic efforts. Even as talks continue, the lack of a clear and lasting resolution has kept risk premiums embedded in oil prices.

Sharp swings

The sharp swings in OMC stocks over the past two sessions also highlight the sector’s sensitivity to global developments. On April 8, shares of BPCL, HPCL, and peers had surged up to 8–10 percent as crude prices plunged following ceasefire announcements.

However, analysts caution that such rallies may be short-lived unless there is sustained clarity on oil supply dynamics and geopolitical stability. They note that while falling crude prices offer near-term relief, structural uncertainties—including potential policy interventions and inventory losses—continue to cloud the earnings outlook for OMCs.

Going ahead, investors are expected to closely monitor developments around the Strait of Hormuz, crude oil price trends, and outcomes of US-Iran negotiations. Any clarity on these fronts could determine the near-term direction of oil marketing stocks, which remain highly sensitive to shifts in global energy markets.

Source: 

• https://www.nseindia.com/get-quote/equity/HINDPETRO/Hindustan-Petroleum-Corporation-Limited
• https://www.nseindia.com/get-quote/equity/BPCL/Bharat-Petroleum-Corporation-Limited
• https://www.nseindia.com/get-quote/equity/IOC/Indian-Oil-Corporation-Limited