Why oil stocks are falling today: IOC, BPCL, HPCL down up to 6%

Shares of oil marketing companies started the week on a weak note, with selling pressure visible across the pack. Stocks of Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL) and Hindustan Petroleum Corporation (HPCL) fell up to 4 per cent in early trade on Monday.

The pressure wasn’t limited to these names. Other energy-linked stocks, including GAIL, Indraprastha Gas (IGL), Mahanagar Gas (MGL) and Mangalore Refinery and Petrochemicals (MRPL), also slipped, though the fall there was relatively smaller.

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What’s behind the fall

One of the key triggers is the rising uncertainty on the global front. Reports around the US, led by President Donald Trump, announcing a complete blockade of the Strait of Hormuz have added to the nervousness.

This route is critical for global oil movement, so any disruption here immediately raises concerns about supply. Brokerage Nomura Holdings estimates that a full blockade could take away about 2.3 million barrels of oil supply per day. For India, that could also mean tighter LPG availability.

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Policy changes in focus

At the same time, there has been a sharp increase in export duties on fuels. The duty on diesel exports has been raised significantly, and the same goes for aviation turbine fuel (ATF).

Interestingly, Nomura believes this could work in favour of oil marketing companies. With higher export taxes in place, standalone refiners may find it less attractive to export and instead sell more in the domestic market. That could allow OMCs to source fuel at better prices.

There is, however, an exception. Reliance Industries may not be impacted in the same way, as its export-focused refinery is expected to be outside the windfall tax framework.

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Who could benefit more

Among the three OMCs, HPCL could be in a slightly better position. A significant portion of its diesel sales comes from fuel sourced from standalone refiners. If procurement costs come down, it could directly support margins.

Nomura estimates current integrated margins at about $2.2 per barrel for IOC, $7.3 per barrel for BPCL and $18.5 per barrel for HPCL, factoring in the impact of the recent tax changes.

Market mood remains cautious

Even with some positives on the policy side, the overall sentiment remains weak. The uncertainty around global supply and geopolitical developments is keeping investors on edge.

The recent fall also adds to a broader downtrend. So far this year, shares of IOC, BPCL and HPCL have already corrected sharply, with losses ranging from the mid-teens to over 30 per cent.

The takeaway

Right now, the sector is being pulled in two directions. On one side, higher export duties could support margins for OMCs. On the other, global risks—especially around oil supply routes—are creating uncertainty.

Until there is more clarity on how these factors play out, the cautious tone in these stocks is unlikely to change in a hurry.