Stable demand, optimism due to Chinas stimulation measures, and supply cuts announced by Russia and Saudi Arabia have led to a surge in oil prices. Sameer Bhardwaj analyses the impact on the Indian economy.

Indian oil marketing companies (OMCs) such as Indian Oil Corporation, Bharat Petroleum Corporation, and Hindustan Petroleum Corporation are diversifying into electric vehicle (EV) charging infrastructure and battery swapping stations to offset the impact of lower fuel sales.

Petromin Corporation KSA and Hindustan Petroleum Corporation Limited (HPCL) have announced a $700 million investment in fuel stations, vehicle service workshops, and EV charging stations. Over the next five years, Petromin Express India, a subsidiary of Petromin Corporation, will invest $100 million to set up 1,000 vehicle service centers at HPCL retail outlets in India. The companies will invest $100 million to install and operate up to 5,000 EV charging units at HPCL stations in India.

The Delhi High Court has upheld the eligibility criteria set by three leading oil marketing companies (OMCs) for their tenders for procurement of LPG cylinders. The criteria stated that cylinder manufacturers with common business ownership could only submit a single bid.

​The overall consumption of refined fuels rose 6.5% in August from a year earlier. The gains in sales of petrol and diesel in August have mainly been on account of the private fuel retailers. State fuel retailers such as Indian Oil, Bharat Petroleum and Hindustan Petroleum together sold 2.9% less diesel in August over last year and 0.4% more petrol.

ith over one-fourth share of India's fuel marketing, and the second-largest number of fuel retail outlets, HPCL is charting out a growth path which will expand its balance sheet and generate new revenue streams, chairman Pushp Kumar Joshi said.

Promoters held 54.9 per cent stake in the company as of 30-Jun-2023, while FIIs owned 13.99 per cent, DIIs 22.32 per cent.

The company will include its solar, wind, biofuels and compressed biogas businesses. “Once this company stabilises, we can look at value unlocking through joint ventures or collaborations,” Pushp Kumar Joshi, chairman and managing director of HPCL, said.

Now, the humble biogas has caught the fancy of some leading energy players of India Inc. Last week Reliance Industries announced its plans to set up 100 compressed biogas (CBG) plants. Adani Group's Adani Total Gas is planning to set up five CBG plants in the next five years with more to follow in future.

Indian refiners, which rarely used to buy Russian oil, have been snapping up discounted barrels after many Western countries shunned purchases from Moscow following its invasion of Ukraine. HPCL's Russian oil intake is limited by the configuration of its refineries, Joshi said, but the company is maximising the use of these cheaper so-called opportunity crudes, he added, helping "ringfence" it from risks arising from high oil prices.

​Right now what we see is that the call writers are getting quite aggressive at 19,300 strike level. And even if you look at put writers, they are struggling to make the position at 19,300.

State-run oil and gas companies have altogether spent ₹34,000 crore in the first four months of the current fiscal year, about a third of their annual capex target of ₹ 1,06,000 crore, government data showed. Indian Oil Corp, the nation's top refiner, has spent ₹10,770 crore in the April-July period, the highest among state oil and gas firms.

Higher crude oil prices accompanied by flat retail prices have meant that the petrol/ diesel gross marketing margins are down to almost break-even levels.

​Now, but if we see the total inflation data which is there for July which has gone up let us say point around 1.95% month to month but year to year it is still down and the overall inflation is lesser than what it was in April.

Their sales of aviation turbine fuel (ATF), as well as LPG, fell by 2% each month-on-month. The sales of ATF, however, were up 8% year-on-year and those of LPG 3.7% higher.

Tata Projects, which was involved in the making of the newly-constructed Parliament building, currently gets a major chunk of its revenues from urban infrastructure projects, which includes setting up of factories, construction of bridges and metros, and airports among others.

India has already rolled out 20 per cent blended fuel, though, in a phased manner, this year and widespread availability is expected in two years. E20 fuel is a blend of 20 per cent ethanol and the rest fossil-based fuel.

India's top oil and gas producer, ONGC, plans to establish two oil-to-chemical plants in India to convert crude oil directly to high-value chemical products, as the company prepares for the energy transition. The production of chemicals using crude oil is regarded as a new avenue since companies worldwide are looking for alternatives as the world gradually moves away from fossil fuels. The International Energy Agency (IEA) claims that the petrochemical industry will contribute to over a third of the increase in oil demand by 2030.

Motilal Oswal recommended Neutral rating on HPCL with a target price of Rs 265 in its research report dated August 03, 2023.

Emkay Global Financial recommended hold rating on HPCL with a target price of Rs 270 in its research report dated August 03, 2023.

Sharekhan is bullish on Hindustan Petroleum Corporation has recommended buy rating on the stock with a target price of Rs 320 in its research report dated August 02, 2023.

Prabhudas Lilladher recommended hold rating on Hindustan Petroleum Corporation with a target price of Rs 264 in its research report dated August 03, 2023.

​The petrol and ATF still there is no windfall tax. So, it is 15 days average price which guides the windfall tax and it will keep on increasing or decreasing depending on the individual product cracks, the way they moved.

HPCL stock has given a return of 21.46 percent over the last six months.

Morgan Stanley maintained an equal-weight rating on M&M Finance with a target price of Rs 300. Disbursements and collections remained strong in July. Collection efficiency in July was also marginally better.

Jet fuel or ATF price on Tuesday was hiked by a steep 8.5 per cent - the second increase in a month, while commercal cooking gas rate was cut by Rs 100 per cylinder in line with divergent trends in international benchmarks. The hike comes on the back of a 1.65 per cent or Rs 1,476.79 per kl increase in ATF prices effected from July 1.

Indian Oil Corp, Bharat Petroleum and Hindustan Petroleum obtained a larger market share last summer as private refiners slowed sales to avoid selling at below-market prices. As international prices sharply rose last summer, state-run companies froze domestic pump prices, prompting private refiners to reduce their retail sales.

The Indian government is expected to hold a significant stake in Hindustan Petroleum Corporation (HPCL) after it exited the company in 2018. While BPCL and Indian Oil have already approved rights issues, HPCL is supposed to come up with a preferential share allotment to the government.

The government had in the annual Budget for 2023-24 (April 2023 to March 2024 fiscal) announced Rs 30,000 crore of capital support to state-run fuel retailers — Indian Oil Corporation (IOC), HPCL and Bharat Petroleum Corporation Ltd (BPCL) — to support their energy transition and net-zero initiatives.

Sanctions over the Ukraine war have led to the emergence of at least 40 middlemen, including "little-known companies" and those reportedly with no prior experience of handling Russian oil, that are handling Russian oil trading between March and June, according to a Reuters tally. These firms are said to have shipped at least half of Russia's overall crude and refined products exports of 6-8 million barrels per day. The new players have become some of the world's largest oil traders and have appeared since Russia's February 2022 invasion of Ukraine, according to the tally.

Notable gainers included MRF, Torrent Pharmaceuticals, Jindal Steel, Glenmark Pharma, TVS Motor Company, and more, solidifying their positions in the market

​​As per a survey by archaeology directorate, there are 62 petroglyphs in Barsu, cultural affairs minister Sudhir Mungantiwar said in a written reply to a query by leader of opposition Ambadas Danve and other in the House. Work on conservation of 17 places having petroglyphs in Ratnagiri district is underway, the minister said. Nine petroglyphs in Ratnagiri district have been included in UNESCO heritage list, which includes three from Barsu, he said.

Indian refiners are poised to gain even more advantages from their advantageous crude oil sourcing, allowing them to maintain realized margins significantly higher than the benchmark margins

Sheela Foam, which owns the popular “Sleepwell” brand, announced that it will acquire a majority stake in Kurlon Enterprises that owns “Kurl-On” brand for Rs 2,035 crore.

The local sale of diesel by private refiners is also denting sales by state-run companies, the official said. The official did not wish to be named as he was not authorised to speak to media.

As a result, the share of state-run players has dropped to 90.5% from 96.7% despite BPCL and HPCL gaining marginally. Indian Oil Corp has been the only loser in the game, with its share declining to 41.4% from 49.1%. Indian Oil's market share gain was equally dramatic last year, rising from 42.4% in June 2021 as it stepped in to fill the gap left by the private players.

India's Hindustan Petroleum Corp Ltd has received six or seven bids from industries to lease a part of its Chhara liquefied natural gas (LNG) import terminal on the west coast. HPCL aims to commission the terminal, with a planned capacity of 5 million metric tons per year (tpy) in the December quarter, K Sreenivasa Rao told reporters at an event.

The range of 19,500-19,600 appears to be an immediate hurdle for the anticipated consolidation, while the major breakout levels around 19,000-18,900 serve as a strong foundation for the market.

Indias banks have largely remained insulated from a global crisis in the industry with their heavy reliance on local markets. Meanwhile, the nations consumer and capital goods companies are expected to benefit from commodity prices that have come off peaks seen after Russias invasion of Ukraine.

Russia bills Indian refiners at a price shade less than the USD 60 per barrel price cap imposed by the West but charges anything between USD 11 to USD 19 per barrel, twice the normal rate, for delivery from the Baltic and Black Sea to the west coast, three sources with knowledge of the matter said.

Some Indian refiners, including a private refiner, have paid for some Russian oil imports in Chinese currency Yuan following such demands from suppliers, according to people familiar with the matter.

​​The capital infusion by the government would strengthen the green ambitions of all three companies, which already have set net-zero targets and drawn up a detailed roadmap to cut emissions.

Mahindra and Mahindra hit a record high and formed healthy bullish candlestick pattern on the daily scale with strong volumes after a consolidation breakout. The stock jumped 5 percent to Rs 1,549, while the stock surged 38 percent from March lows.

The retail margins on petrol and diesel jumped sharply in the April-June quarter over the previous quarter. This coupled with gross refining margins of $7.7-9 per barrel (net of windfall tax, estimated inventory loss and Russian crude cost-benefit) would help boost the profit of the three state-run oil marketing companies (OMCs), ICICI Securities said.

Over the past one month, shares of Bharat Petroleum Corporation Ltd (BPCL), Indian Oil Corporation (IOCL), and Hindustan Petroleum Corporation Ltd (HPCL) have risen 10-16 percent. And have gained around 18-33 percent during the past three months.

Mid-sized companies in India are demonstrating strength and growth potential, as reflected in the surge witnessed by the S&P BSE MidCap index. Stocks of companies such as Abbott India, Colgate-Palmolive, Godrej Properties, and Lodha hit new 52-week highs, showcasing their market appeal and resilience.

“The key concern is we are entering into the election phase and Opec wants to support crude at $75-80 per barrel and above given the fiscal balance for most of these Opec countries, particularly Saudi is around those levels. So, in an election period, crude prices upwards of $75-80 may pose concerns for OMCs down the line. That is the key concern.”

On July 4, 2023 HRRL executed a loan agreement under a consortium arrangement for Rs 48,625 crore, wherein the share of PFC Ltd was Rs 9,187 crore. HRRL is a Joint Venture (JV) between Hindustan Petroleum Corporation Ltd (HPCL) and the Rajasthan government. HPCL holds 76 per cent in the JV, while the Rajasthan government holds the remaining 26 per cent stake.

​The third part is that whether the OMCs should be rated or which way it is rated. Of course, the analysts are better judge to do that. But I believe, and I have said earlier also that the oil companies are under-priced compared to what the potential they have.

Goldman Sachs has a buy rating on Godrej Consumer with a target price of Rs 1150. Q1 saw very strong traction across segments which suggests that the turnaround story continues to play out.

As part of its energy-transition goals, BPCL is also looking to expand its renewable power generation portfolio to 1GW by 2025 and 10GW by 2040, from 50MW currently. IOC is also looking to expand its renewable energy portfolio substantially from the current level of 238MW, and to install 10,000 electric vehicle charging stations in the next three years, from the 1,900 it has already.

Announcements of plans to raise equity capital by Bharat Petroleum Corporation Limited (BPCL) and Indian Oil Corporation Ltd (IOC) - should strengthen their capex spending and the credibility of their emission-reduction plans, said Fitch Ratings in a note on Wednesday.

The project includes setting up of an energy efficient and environment friendly refinery cum petrochemical complex, crude and product storage facilities, township and allied facilities and utilities, a captive power plant for meeting refinery power and steam requirement.

The oil & gas, energy, public sector, and metals sectors performed well, while healthcare, capital goods, auto, and IT sectors experienced some selling pressure. Stocks like Suzlon, L&T Finance, and HPCL were in focus. Analyst Kumar Saurabh highlights that Suzlon and L&T Finance have potential for gains, but caution is needed due to their distance from key support levels. HPCL's good Q4 results and a rounding bottom base indicate swing trading opportunities.

Fitch Ratings expected India's petroleum product demand in the financial year ending March 2024 (FY24) to grow by a mid-single digit percentage after a 10 per cent rise in FY23, which was aided by the post-pandemic pent-up demand.

Indian refiners are beginning to use the Chinese yuan to pay for oil imports from Russia, as Western sanctions against Moscow make it difficult to settle payments in dollars. India has become the largest buyer of Russian oil, and both state and private refiners are paying in yuan when banks refuse to handle dollar transactions. This shift to the yuan is part of Beijing's efforts to internationalize the currency and comes after China overtook Saudi Arabia as Russia's top crude supplier in Q1 2018.

Several mid-cap stocks on the S&P BSE MidCap index reached new 52-week highs, attracting significant investor attention. Some of the notable performers include ABB, Abbott India, Aditya Birla Capital, Ashok Leyland, Cholamandalam Investment & Finance, Cummins India, Exide Industries, Godrej Industries, Hindustan Petroleum, and L&T Finance Holdings. These companies operate in various sectors such as electrification, pharmaceuticals, financial services, automotive, and manufacturing. Please note that the data is sourced from BSE and is current as of 12:45 pm.

Indian stock indices, S&P BSE Sensex and Nifty50, reached new all-time highs on Friday, closing with gains. The Sensex rose by 803 points or 1.26% to 64,719, while the Nifty50 climbed 217 points or 1.14% to 19,189. The Nifty Bank also saw gains of nearly 1%. The positive performance was attributed to global data, strong foreign institutional investor (FII) buying, and progress in monsoon. The auto sector is expected to be in focus due to monthly sales data releases, and economic data locally and globally will influence market movements.

Recently, stock has managed to give a follow through move to this breakout reinforcing bullish momentum.

Basic customs duty will be nil for import of domestic LPG sold to household consumers by state-owned oil marketing companies. The customs duty rate will be 15% for other importers of domestic LPG. The new rates will be effective from July 1.

Jet fuel prices in India have been raised by 1.65% after four months of reductions. The increase follows a rise in global rates and is the first price hike in four months. Aviation Turbine Fuel (ATF) prices were increased by INR 1,476.79 per kilolitre in the national capital to INR 90,779.88 per kl. In addition, commercial LPG prices remained unchanged in Delhi but marginally increased in Mumbai, Kolkata, and Chennai.

Indian Oil Corporation, the largest operator of petrol pumps in the country, has the highest number of pumps with EV charging facilities. Its 5,600 pumps, or about 15% of its 36,400 total outlets, offer charging facilities. Hindustan Petroleum Corporation (HPCL), the second-largest operator of petrol pumps, has charging facilities at 2,100 fuel stations, or a tenth of its total pumps. BPCL offers EV charging at 738 pumps of the total 21,100.

State-owned Oil and Natural Gas Corporation (ONGC) has sold its initial gas production from the KG basin fields to three firms, including Torrent Gas. The company sold 1.4 million standard cubic meters per day in an e-auction. GAIL bought 0.8 mmscmd, HPCL bought 0.42 mmscmd, and Torrent bought 0.12 mmscmd.

The Indian government is set to inject multi-billion-dollar equity in its three big state refiners - Bharat Petroleum, Indian Oil Corp and Hindustan Petroleum Corp Ltd - in return for funding towards the firms' energy transition projects.

Indian Oil Corporation (IOCL) and Bharat Petroleum Corporation (BPCL) plan to launch rights issues while Hindustan Petroleum Corporation (HPCL) will issue preferential shares to the government in the current financial year. The government had set aside INR300bn ($4bn) for capital support for the government-owned firms. This support was conditional on the state-run oil marketers submitting capital investment plans for 2023-24.