OMCs rejoice as oil falls

Oil prices have simply fallen off the cliff and one does not know where it will land. International oil prices have crashed over 30% as a price war has erupted between Saudi and Russia.

Suffering the worst loss since the Gulf War in 1991, benchmark oil crashed to $31/barrel and Goldman Sachs warned that prices could plummet to as low as $20/barrel.

In India, this is good news for the downstream oil companies or oil marketing companies (OMCs) like HPCL, BPCL and Indian Oil Corporation. Falling oil prices means, their feedstock costs have fallen materially. But how much these companies will gain with rupee falling against the dollar is a question mark.

Yet it is undeniable that this is a good time for OMCs.

That’s the reason why HPCL, BPCL and IOC are among the top five gainers.

IOC rose 4.5% to Rs.105.25; HPCL rose almost 13% to Rs.226.60 and BPCL was also up 13% at Rs.454.10.