New Delhi: Indian refiners slumped on Monday as a widening U.S.-Israeli war with Iran pushed Brent crude to a nearly four-year high, threatening their near-term earnings and raising the risk of further government intervention.
State-run Indian Oil dipped 4.6%, Hindustan Petroleum slid 4.9% and Bharat Petroleum dropped 5.4%, with BPCL heading for its steepest fall since June 2024.
The rout dragged the Nifty oil and gas index down 2.7% and the energy index 2.1% lower, while the benchmark Nifty 50 slid 2.8%. The oil and gas index has fallen 6.6% since the U.S.-Israeli strike on Iran last week.
India’s top refiner Reliance Industries was down 0.4% after slipping 2.5% earlier.
UBS said Indian oil marketing companies are exposed to the crude spike because their fuel sales far exceed their production – roughly double for IOC and BPCL, and even more for HPCL.
The brokerage downgraded IOC and BPCL to “neutral” and HPCL to “sell” from “buy”.
It also reduced fiscal 2027 profit estimates by 19% for IOC, 15% for BPCL and 46% for HPCL.
RISKS OF PROLONGED CONFLICT
Oil prices surged about 26% to $119.5 per barrel – the highest since July 2022 – as some major producers cut supplies and fears of prolonged shipping disruptions gripped the market.
Iraq and Kuwait have begun reducing oil output, adding to earlier liquefied natural gas (LNG) cuts from Qatar as the war disrupted shipments out of the Middle East.
Citi on Monday warned refiners‘ earnings will hinge on how long the geopolitical shock persists, flagging risks from any potential closure of the Strait of Hormuz and shutdowns in Qatar’s LNG output – each supplying roughly half of India’s crude and LNG needs.
India, the world’s second-biggest importer of LPG, consumed 33.15 million metric tons of the cooking gas last year, with imports meeting about two-thirds of demand. Middle Eastern suppliers account for 85%-90% of India’s LPG inflows.
New Delhi on Friday invoked emergency powers directing refiners to maximise liquefied petroleum gas production to prevent a cooking-gas shortage following supply disruptions.
Prolonged turmoil could force additional government intervention, including export curbs, duties on refined products or direct budgetary support, Citi added.
Meanwhile, Indian companies raised LPG prices for the first time in about a year on Friday, tracking global benchmarks as the war crimps flows from the Middle East.
India imports more than 80% of its crude oil needs and is the world’s third largest oil importer. [Reuters]
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