Crude oil prices have fallen below $70 a barrel as OPEC+ gradually phases out voluntary production cuts, and at the same time, the US economic prospects worsen. This is a double whammy.
Falling oil prices hurt upstream companies (oil drilling, for instance) while they may benefit oil marketing companies (OMCs). Lower crude oil prices reduce OMCs’ input costs, boosting margins and profits.
The impact is even stronger for Indian OMCs, as retail fuel prices remain unchanged. With selling prices holding steady while crude costs decline, margins expand, further strengthening profitability. Reflecting the optimism, the Nifty Energy Index regained 11.5% in March to date, showing an improved sectoral outlook.
In this article, we highlight two energy stocks that could benefit from the recent plunge in crude oil prices.
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Bharat Petroleum Corporation (BPCL) is a government of India undertaking (51.9% stake) and a Fortune 500 company. BPCL is in the business of refining crude oil and marketing petroleum products.
It is India’s third-largest oil refining company, with a market share of around 25.4% and a total refining capacity of 35.3 million metric tonnes (MMT), representing about 14% of India’s total refining capacity.
In addition, it is India’s second-largest OMC, with a domestic sales volume of over about 51 MMT in FY24. With around 22,921 retail outlets as of January 2025, BPCL has the second-largest marketing set-up in the country for selling petroleum products.
The company’s third-quarter performance was in line with market expectations, as strong marketing margins offset weak refining performance. BPCL revenue in Q3FY25 declined 2% YoY to ₹1.30 trillion. However, despite slower revenue growth, profit rose 37% to Rs 38 billion, driven by higher marketing margin.
Moreover, the company’s marketing gross margin (GM)- the profit BPCL earns from selling petroleum products through its retail network grew 113% to ₹7.4 per litre, as retail prices remained fixed despite lower crude prices. Better marketing margins offset lower GRMs, leading to improved profitability.
The high marketing margins could continue in the coming quarters due to lower crude prices if everything remains constant. Antique Stock Broking says continued weakness in crude oil should support healthy marketing margins,
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