HPCL, BPCL, IOC rally 7-9% on rising oil demand, crude prices
Share prices of oil retailers rallied 7-9 percent intraday on June 8 as international crude prices increased and demand for oil rose as the Indian economy re-opened in non-containment zones with fresh guidelines.
The government allowed re-opening of shopping malls, hotels, restaurants, religious places, shops, offices, etc in all non-containment zones with effect from June 8, but with fresh guidelines as the risk of COVID-19 is still big in major cities like Mumbai, Delhi, Ahmedabad, Kolkata, Chennai etc.
Agriculture and industrial activities were allowed in May itself.
Hence, the demand for oil seems to be getting back though it might take some time to get back to pre-lockdown phase.
“As lockdown is partially lifting out, demand for petroleum products is continuously on the rise. Demand for petroleum products improved around 65-70 percent MoM in May 2020 and was lower by 30-35 percent from pre-COVID levels. Auto fuels, which was down by 55-60 percent in April is now down by just 25 percent YoY. Jet fuel demand is still down over 50 percenet which was down by nearly 91 percent,” IDBI Capital said.
The brokerage further said refinery utilisation at BPCL improved to 83 percent now from 63 percent in April 2020 and 77 percent in May. “Similarly, IOC and HPCL’s refineries are operating at over 80 percent now.”
Bharat Petroleum Corporation was up 7.06 percent at Rs 396, Indian Oil Corporation up 5.42 percent at Rs 94.30 and Hindustan Petroleum Corporation up 7.94 percent at Rs 220.80 on the BSE at 12:04 hours IST.
In addition, the crude oil prices in the international markets also gradually inched above $40 a barrel mark after falling to two-decade lows of $15.98 a barrel in April.
Brent crude futures, the international benchmark for oil prices, traded at $42.59 a barrel at the time of publishing this copy, rallying 109 percent in last two weeks amid optimism of re-opening of global economies and further extension by OPEC+ to the supply cut upto July.
In April, Organization of the Petroleum Exporting Countries (OPEC), Russia and other allies announced production cut of 9.7 million barrels per day (around 10 percent of global oil supplies). On June 6, OPEC+ agreed to extend the deal by a one more month till July against earlier two months (May-June).
“Indian refiners were enjoying a huge discount of upto $5-8 a barrel on crude oil purchase in the month of April and early May 2020. However, discount has not just wiped out but some refiners are paying premium as well in some cases,” said IDBI Capital.