Crude Oil Prices Hit 2-Month Low; IOC, BPCL, HPCL Jump 2-6% Each

The stock prices of major oil marketing companies in India, including Indian Oil Corporation, Bharat Petroleum Corp, and Hindustan Petroleum Corp, saw a notable surge ranging from 2 to 6 percent in early trading on May 2. This upward movement was attributed to a significant drop in Brent crude prices, which hit their lowest levels in two months.

A decline in Brent crude prices is generally favorable for oil marketing companies as it reduces their input costs. This, in turn, provides them with more flexibility to maintain competitive prices, ultimately bolstering their profit margins.

The decrease in oil prices on May 1 was triggered by the decision of the US Federal Reserve to maintain interest rates, a move seen potentially dampening economic growth and limiting the increase in oil demand for the year. Brent crude futures for July managed to gain 58 cents, reaching $84.02 a barrel, while US West Texas Intermediate (WTI) crude for June climbed 53 cents to $79.53 a barrel, according to a Reuters report.

Hindustan Petroleum Corporation saw its shares trading at Rs 529.40 per share on the National Stock Exchange (NSE), marking an increase of Rs 34 or 6.86 percent. Similarly, Bharat Petroleum Corporation was quoted at Rs 630.40 per share on NSE, up Rs 23.05 or 3.8 percent. Indian Oil Corporation, on the other hand, was trading at Rs 172.50 per share on NSE, reflecting a rise of Rs 3.65 or 2.16 percent.

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However, despite the positive market sentiment driven by the decrease in oil prices, Indian Oil Corporation Limited (IOCL) reported a significant decline in its consolidated net profit for the fourth quarter of the financial year 2023-24. The company’s net profit stood at Rs 5,487.92 crore, marking a 49 percent decrease compared to the same period in the previous year when it had posted a profit of Rs 10,841.23 crore.

This decline in profitability occurred against the backdrop of a 16 percent increase in crude oil prices during the initial months of 2024, as reported by moneycontrol.com. Sequentially, IOCL’s net profit witnessed a 40 percent decline from the preceding quarter, with the company reporting a profit of Rs 9,224.85 crore in the December quarter.

In addition to the decline in net profit, IOCL also experienced a marginal decrease in revenue, with figures amounting to Rs 2.23 lakh crore in Q4 compared to Rs 2.30 lakh crore in the previous year. Despite these challenges, Indian Oil declared a dividend of Rs 7 per equity share. However, the company’s earnings before interest, tax, depreciation, and amortization (EBITDA) saw a significant decline of 26 percent from the previous quarter, standing at Rs 13,660.5 crore in Q4 FY24 compared to Rs 18,491.55 crore in Q3 FY24.

In conclusion, while the recent surge in oil marketing companies’ stock prices can be attributed to the decline in Brent crude prices, the financial performance of Indian Oil Corporation in the fourth quarter of FY23-24 paints a contrasting picture. Despite facing challenges such as decreased profitability and revenue, the company remains committed to providing value to its shareholders through dividend payouts.

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