The Hindu Business Line
OMCs slip on crude price rally
The deals to cut oil production by OPEC and some non-OPEC nations saw Brent crude rally nearly 20 per cent since November end to about $55 a barrel. But this sharp spike took a toll on the stocks of public sector oil marketing companies (OMCs) – BPCL, HPCL and Indian Oil. BPCL has lost about 7 per cent since November end, while HPCL has slipped 11 per cent. Worries that higher oil prices could increase the working capital requirement of these companies have been a dampener. The OMCs get compensated for under-recoveries on LPG and kerosene by the government and the upstream companies, but the government compensation comes with a lag. In the interim, the OMCs bear the burden. On the other hand, the PSU upstream stocks — ONGC and Oil India — have gained from the oil price rally on hopes of increase in their net realisations. ONGC is up 6 per cent since November end while Oil India has gained 3 per cent.