Crude oil cools to double digits, but can it still dent OMCs' profitability? Explained

Shares of oil and gas companies declined sharply on Tuesday after government signals that petrol and diesel prices are unlikely to be raised immediately despite volatility in global crude oil prices. The announcement triggered selling in oil marketing companies (OMCs) as investors feared refiners may have to absorb part of the cost if crude prices remain volatile.

The broader market opened nearly 1 per cent higher during the session, but oil marketing stocks moved in the opposite direction as traders reacted to the policy signals and rising uncertainty in global energy markets.

Government says fuel prices likely to stay stable

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Government sources told ANI that India currently has adequate fuel reserves and stable supply arrangements. Officials indicated that petrol and diesel prices are expected to remain steady unless global crude oil prices cross the $130 per barrel mark.

Authorities also assured that petrol pumps across the country are well supplied and there is no shortage of fuel.

The government has also taken steps to manage supply risks. Officials said India has increased crude sourcing from routes outside the Strait of Hormuz to reduce reliance on the key shipping corridor.

Sources added that sufficient stocks of aviation turbine fuel are available. LPG booking cycles have also been extended from 21 days to 25 days to prevent hoarding and ensure stable supply for domestic consumers.

Why OMC stocks are under pressure

The government’s message that retail fuel prices may not be increased immediately has created concern among investors about the profitability of oil marketing companies.

Analysts say when crude oil prices remain volatile but retail fuel prices are kept stable, refiners and fuel retailers may have to absorb the cost pressure.

Crude oil markets have seen sharp swings in recent days due to geopolitical tensions involving Iran and the United States. The uncertainty has increased volatility in energy markets.

As a result, investors trimmed exposure to oil marketing companies, fearing that they may have to manage the impact of fluctuating crude prices without immediately passing the cost to consumers.

Quarterly earnings at a glance

State-run oil marketing companies reported strong profit growth in Q3 FY26. Indian Oil Corporation, Bharat Petroleum Corporation, and Hindustan Petroleum Corporation all posted higher earnings on a YoY basis.

IOC reported the sharpest rise in profit, with net profit jumping 322% YoY to Rs 12,125.86 crore. BPCL’s profit rose 62.3% YoY to Rs 7,545 crore, while HPCL reported a 57.7% YoY increase to Rs 4,011.40 crore.

Revenue growth remained moderate across the three companies, rising between about 4.66% and 7% YoY during the quarter.

The earnings growth was supported by improved refining margins and relatively lower crude oil prices during the period.

Oil & gas index leads sectoral losses

The Nifty Oil & Gas Index emerged as the worst-performing sectoral index during the session. The index declined about 1.6 per cent, or nearly 188 points, to around 11,423.60 from opening levels, as per data available on the National Stock Exchange.

The weakness was seen across the energy value chain, including upstream explorers, refiners, gas importers and city gas distributors.

OMC shares fall up to 4 per cent

Among individual stocks, Bharat Petroleum Corporation Limited declined 3.61 per cent to Rs 324.35.

Hindustan Petroleum Corporation Limited dropped 3.76 per cent to Rs 384.55.

Indian Oil Corporation fell 3.23 per cent to Rs 159.12.