Two important factors keep these stocks in focus. First, of course, is a rebound in crude oil prices, with both Brent and WTI rebounding back above the $100 a barrel mark. That is a negative for HPCL, BPCL and Indian Oil.
There are also developments with regards to the US announcing a complete blockade of the Strait of Hormuz, as announced by President Donald Trump.
Brokerage firm Nomura believes that a complete blockade may result in an incremental supply loss of 2.3 million barrels per day of oil. A complete blockade, as per Nomura, may also impact Indian LPG supplies.
Additionally, the duty on the export of diesel has been increased from ₹21.5 per litre to ₹55.5 per litre, while the duty on Aviation Turbine Fuel (ATF) has been increased from ₹29.5 per litre to ₹42 per litre.
According to Nomura, the increased windfall tax on diesel and aviation turbine fuel (ATF) exports should benefit OMCs.
However, it expects the windfall tax to not be applicable to Reliance Industries Ltd.’s export refinery, which is almost half of its total refining capacity.
Meanwhile, the domestic refineries of Reliance, Nayara, MRPL, CPCL, HPCL Mittal Energy, Numaligarh and others will be subject to windfall tax on exports of diesel and ATF, it said.
The brokerage thinks this will benefit OMCs as standalone refiners may get into agreements with them to sell diesel and ATF at their export realised prices (post windfall tax), directly translating into saving for the OMCs by similar amount on volumes they source from third-party refiners.
The OMCs, especially HPCL, may benefit significantly as 40% of its diesel retail sales (32% of total refinery throughput) are sourced from standalone refineries, Nomura said.
Nomura has estimated the current integrated margins for IOC, BPCL and HPCL to be at $2.2 per barrel, $7.3 per barrel and $18.5 per barrel respectively, at the current prices, including benefit from higher windfall tax.
Shares of IOC, BPCL and HPCL ended the previous trade session 0.8% to 0.9% higher. The stocks have declined between 15% to 30% this year, so far.
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