
Brent crude futures for August delivery surged more than 13 per cent on Friday, following a brief pause the day before, bringing the total gain for June to 22.70 per cent. The sharp rise came after Israel announced it had struck Iran, heightening fears of potential disruptions to oil supplies amid escalating tensions in the Middle East.
Israel stated that it had hit Iran’s nuclear facilities, ballistic missile production sites, and military leadership as part of the opening phase of what it described as a long-term campaign aimed at preventing Tehran from developing a nuclear weapon, according to Reuters.
At last count, Brent futures were trading at $78.48, up 13.16 per cent.
Emkay Global said oil prices continue to be volatile, with geopolitical risks (US-Iran, Russia-Ukraine) and trade developments (US-China) driving Brent currently from $60 a barrel a month ago, while OPEC+ continues to raise production.
OMC stocks
ICICI Securities said strong GRMs and retail margins in June quarter imply robust earnings prospects for the OMCs for FY26 if these trends hold.
"Refining market still has demand and supply as broadly balanced, but H1FY26 is seeing strength owing to closures of large refineries across Europe and the US (see exhibit 3-4). The sudden tightness in supplies of key transport fuels has driven unexpected strength in margins for gasoline/diesel and ATF, which in turn has driven theoretical GRMs for Indian refiners to multi-month highs in May," it said.
Additionally, retail fuel margins continue to benefit from a combination of lower crude prices and limited pressure to cut fuel prices domestically, it said.
"This, coupled with sharply lower LPG loss estimated in FY26, drives our renewed optimism for the OMCs. Reiterate BUY on all three names," the brokerage said.
Emkay Global said fundamental factors would prevail as it does not see any reason for upping FY26E Brent assumption of $70 per barrel.
"Despite shifting sentiments, the year so far has been solid for OMCs, with diesel-petrol marketing margin at Rs 9-13 per litre, LPG under-recoveries down to Rs 176m per cylinder (from Rs 247 in Q4FY25), and gasoline cracks moving up by over $2 per barrel QoQ," Emkay Global said.
Against this, lower oil prices would create inventory losses though BPCL-HPCL should not see more than a $1.5-2.0 per barrel impact if crude price closes at $70 a barrel.
"IOCL, due to an extended cycle, is likely to record a loss of up to $4 a barrel. Nevertheless, Q1FY26E reported PAT for HPCL/BPCL/IOCL is likely to be 49 per cent/42 per cent/33 per cent of our full year estimate, with Q2 also looking good given that LPG losses would fall further to Rs 150 per cylinder," Emkay Global said.
The currency has also been stable, and any LPG subsidy or further fall in international LPG prices grants further upside potential for OMCs’ earnings.
"We favor HPCL, followed by BPCL, and IOCL in that order, and reiterate BUY with TP of Rs 500/Rs 400/ Rs 170, respectively," it said.