Shares of state-run oil marketing companies Hindustan Petroleum Corporation Ltd (HPCL), Bharat Petroleum Corporation Ltd (BPCL), and Indian Oil Corporation Ltd (IOCL) are trading in the red zone on July 8. HPCL shares fell nearly 5 per cent to an early low of Rs 387.15 apiece on the NSE, on the other hand shares of BPCL fell nearly 5 per cent to an early low of Rs 299.4 apiece. Shares of IOCL declined over 3 per cent to Rs 137 apiece on the NSE.
Following the decline in OMC stocks, a ripple effect was seen across the broader energy sector, as the Nifty Oil and Gas index took a sharp downward dive, hitting an intraday low of 11044.85 and falling nearly 2 per cent in early trade. The benchmark Nifty also slipped 0.51 per cent as the market factored in a rapid spike in international energy prices and fresh uncertainty amid a flare up in geopolitical tensions.
HPCL, IOCL, BPCL Shares Tumble, Nifty Oil and Gas Slips Nearly 2%
One of the key reasons behind the fall in the oil and gas sector is a sharp rise in global crude oil prices.
Why are Oil and Gas Stocks Falling
One of the key reasons behind the fall in the oil and gas sector is a sharp rise in global crude oil prices. fueled by the US-Iran conflict flaring again in a highly volatile region. At the time of writing, West Texas Intermediate Crude traded around $72.76 per barrel up by 3.29 per cent while Brent Crude traded around $76.60 per barrel up by 3.29 per cent. The rise in crude oil prices was seen after the United States launched fresh airstrikes against Iran and moved to reinstate sanctions on crude sales.
The escalation has revived concerns over potential supply disruptions through the Strait of Hormuz. Disruptions to the crucial route are anticipated to break the truce in West Asia. Crude supplies also came under pressure from a hit to Russian crude supplies. A long-range Ukrainian drone strike targeted the Omsk oil refinery Western Siberia. Notably, the refinery is Russia's largest fuel processing facility. The attack damaged a unit which accounts for approximately 38 per cent of the plant’s production capabilities. The disruption is expected to have knocked out a processing capacity of roughly 24,580 metric tons of crude oil a day. Markets across the globe are trying to figure out the impact of the recent disruptions in terms of how much crude oil has slipped from the available daily global pool which in turn increases the premium on existing stockpiles and drives a highly volatile trading environment.
Nifty Oil and Gas Gainers and Losers
Despite the broader sectoral weakness in energy, the Nifty Oil and Gas basket is witnessing a divergence in performance. Even as 10 stocks out of the 15-share Nifty Oil and Gas declined, five have advanced, these include upstream oil exploration companies such as Oil and Natural Gas Corporation (ONGC) and Oil India. ONGC shares gained nearly 2 per cent to trade at an early high of Rs 248.35 apiece, while shares of Oil India gained nearly 3 per cent to trade at an early high of Rs 433.95 apiece. Other gainers included Chennai Petroleum Corporation, Adani Total Gas, GAIL (India) and Indraprastha Gas which traded higher by 4 per cent, 1 per cent and 0.65 per cent and 0.33 per cent respectively at the time of writing.
(This is a developing story, please follow this space for more updates)