HPCL, BPCL, IOC shares fall up to 4% as brent crude rates breach $70 per barrel

Shares of India's downstream oil refiners, including Hindustan Petroleum Corporation Ltd. (HPCL), Bharat Petroleum Corporation Ltd. (BPCL), and Indian Oil Corporation Ltd. (IOC), saw a decline of up to 4% on Thursday. This follows a surge in crude oil prices, with Brent crude surpassing $70 per barrel. The increase in crude prices is attributed to escalating geopolitical tensions in the Middle East, particularly as the prospects for a US-Iran nuclear deal diminish.

The heightened tensions have led to Iran threatening to target US military bases, and the UK Navy has issued warnings about the impact on shipping in the region. These developments have added layers of complexity to the already volatile oil market, influencing investor sentiment significantly.

The increase in crude prices presents a challenge for oil marketing companies, leading to higher raw material costs and impacting their margins. This development is contrasted by the fortunes of upstream oil explorers such as Oil India and ONGC, whose shares have increased by 3% and 2% respectively.

Oil India, notably, has seen a continuous rise following a positive brokerage note. These companies benefit from the higher prices of refined products, which bolster their revenue streams. The contrasting impacts on different segments of the oil industry highlight the intricate dynamics at play in global energy markets.

In a broader context, the Energy Information Administration (EIA) has projected a short-term decline in crude oil prices, suggesting that rising global oil inventories will drive prices lower. This forecast follows the largest single-day surge in oil prices since October last year, with West Texas Intermediate increasing by 1.7% to $69.29.

Despite the current hike due to geopolitical unrest, the EIA's outlook reflects an expectation of temporary relief in crude oil prices. Such fluctuations underscore the unpredictable nature of the oil market, which remains sensitive to both geopolitical and economic shifts.