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News Topical, Digital Desk : After the US attack on Iran's nuclear sites, tremendous action is being seen in the price of crude oil in the international market. Its effect is visible on the shares of domestic downstream oil marketing companies. Iran's Parliament has approved the proposal to close the Strait of Hormuz. The Strait of Hormuz is a very important route for transporting crude oil to the whole world, through which about 20% of the world's crude oil and LNG trade takes place.
After this attack, there was a sharp rise in the price of crude oil. However, after some time, there was some decline from the upper levels and the price of Brent crude oil slipped to around $ 78 per barrel. WTI crude oil is also close to $ 75 per barrel.
How does expensive crude oil affect shares?
Usually, with the rise in the price of crude oil, pressure is seen on the shares of oil marketing companies. The cost of these companies increases and they are not able to put the entire burden of this expense directly on the customers. Therefore, the profit and margin of these companies are affected.
On the other hand, oil exploration companies like ONGC and Oil India benefit from expensive crude oil. The cost of these companies is roughly the same, but the income per barrel increases. In such a situation, there is a hope of a positive impact on the earnings of these companies.
How much impact on the shares of oil companies?
HPCL: On Monday at 11:00 am, this stock was seen trading at Rs 385 per share with a decline of about two and a quarter percent. BPCL: This stock also fell by more than 1% and was trading at Rs 310 per share. India Oil: This stock also saw a decline of about 1%, after which it was seen trading at a price of about Rs 137 per share. If we look at the upstream companies, ONGC was also seen trading with a pressure of about half a percent at Rs 251 per share and OIL India was also seen trading with the same weakness at Rs 463 per share. What is the analyst's opinion on these stocks? Brokerage firm Emkay Global says that as long as the average price of Brent crude oil remains at $ 75 per barrel, there will be no pressure on the earnings of oil marketing companies. These stocks are expected to rise due to reduction in LPG prices, availability of LPG subsidy and continuation of the current earning rate. On the other hand, JM Financial has maintained BUY rating on ONGC and OIL India. This brokerage firm says that the current price of these stocks has digested the crude oil price of $65 per barrel. Every dollar per barrel increase in crude oil will have a positive impact of 1.5-2% on the earnings per share (EPS) of these companies. This brokerage firm has maintained a Sell opinion on HPCL/IOCL and a Hold opinion on BPCL. The brokerage firm believes that the risk-reward does not seem reasonable considering the capex plan and valuation of the oil marketing companies.
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