Stock Market Today: Nifty Oil & Gas index gained up to 1.5% during the intraday trades on Friday. Oil marketing companies such as Bharat Petroleum Corporation Ltd (BPCL), Hindustan Petroleum Corporation Ltd (HPCL) and Indian Oil Corporation ( IOCL) Share prices gaining up to 7% led the gains. While Bharat Petroleum Corporation Ltd (BPCL) share price scaled 1 year high

Among others Gujarat Gas, Petronet LNG Ltd, Gujarat State Petronet Ltd. GAIL (INDIA) LTD were other key gainers in the index

Lower Crude oil Prices improve outlook

The decline in Crude oil prices is leading the gains for Oil Marketing companies as Bharat Petroleum Corporation Ltd (BPCL), Hindustan Petroleum Corporation Ltd (HPCL) and Indian Oil Corporation ( IOCL) Share prices.

Brent Crude prices that were at close to $ 90 a barrel and even higher in April’2024 are trading close to $70 a barrel levels. Notably the Crude prices are down around 8% in last one week.

The lower crude prices bode well for marketing margins of Oil Marketing companies. The marketing margins are those profits that these companies make by selling auto fuels at their outlets and hence lower costs of crude oil bode well for these margins.

Analysts maintain positive outlook for BPCL, HPCL, IOCL

Against the backdrop of weak crude oil prices and a range-bound refining GRM environment, the outlook for marketing margins remains strong, said analysts at Motilal Oswal Financial Services

Also they add that OMCs appear to be trading at the higher end of the historical range, street earnings estimates are building in only ₹3-4 per liter marketing margins while current margins are above ₹10 a liter.

These should address concerns not only on the valuations at which OMCs may be trading at but also on any fuel price cuts that OMCs may be asked to undertake ahead of state elections looking at decline in crude prices.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions