BPCL, IOCL, HPCL Upgraded From Add To Buy By Avendus Capital On Benign Crude Play

Crude could be priced between $75 and $85 per barrel, Avendus Capital said.
<div class="paragraphs"><p>An oil refinery. (Photo:&nbsp;Alex Simpson/Unsplash)</p></div>
An oil refinery. (Photo: Alex Simpson/Unsplash)

Avendus Capital Pvt. has upgraded public sector oil marketing companies from an 'add' to a 'buy' rating due to low crude prices.

It prefers BPCL Ltd., Indian Oil Corporation Ltd., and HPCL Ltd. in the same order.

Crude could be priced between $75 and $85 per barrel, Avendus Capital said. OMCs typically outperform during stable or low oil prices, according to the brokerage.

Stock Market Live: Sensex, Nifty Struggle Amid Volatility As Metal, Realty Stocks Decline

Shares of Hindustan Petroleum Corp. advanced 3.06% to Rs 237.4 apiece, as of 9:59 a.m., in trade on Thursday. The Nifty was trading lower by 0.52%. The scrip rose 4.54%—the most in nine weeks since Jan. 11, 2023.

Bharat Petroleum Corp. advanced 3.15% to Rs 340.7 apiece. The NSE Nifty 50 was trading lower, the same as Hindustan Petroleum Corp. The scrip rose 4.89%, the most since Nov. 28, 2022.

Indian Oil Corp. also advanced 0.64% to Rs 79.1 apiece. Nifty traded lower by 0.52% as well. The scrip rose 1.97%, the most since March 6, 2023.

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Avendus Capital On OMCs

  • Range-bound crude prices help OMCs to have a relatively stable marketing margin, low working capital, and a better gross refining margin on lower fuel utility and loss.

  • As per the brokerage, near-term refining margins will benefit from lower sourcing costs, a higher Russia mix, and lower Middle East premiums.

  • Two out of the three global agencies expect demand to outpace supply growth. Mixed signals on global oil trends, China's reopening, and aviation turbine fuel will drive the demand growth.

  • Higher global crude inventories, excess China crude, headroom in Russia to produce more, and OPEC+ production all favour slower oil prices, which could be further propelled by recession.

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