Downstream down and upstream up!

The oil marketing (OMCs) or downstream companies are leading the fall on the markets today morning. The top losers are HPCL – down 7%, BPCL – down 6% and IOC – down 6.25%. Chennai Petro is also among the top five losers, down 4%.

There is unconfirmed news that the Govt has asked these OMCs to not hike fuel prices. This means that the OMCs will have to absorb a loss of Re.1/litre on petrol and diesel due to the increasing price of crude.

Yesterday, crude in the international market rose sharply. Brent crude futures rose over 2% to $70.21/barrel – a four year high.

On the other hand, the beneficiaries of the higher crude prices, the upstream oil companies or exploration companies, ONGC, Oil India are up. In fact Aban Offshore is the top gainer on the BSE, up over 5.5%. A higher crude price for these companies means higher earnings as realisations will go up.

Clearly, one’s loss is the other’s gain.