OMCs recover after two-day sell-off; HPCL jumps 6%, IOCL, Gail gain 4% each

Shares of oil & gas and state-run oil marketing companies (OMCs) rose in the early morning deals on Monday, after witnessing heavy sell-off in the last two trading sessions.

At 09:52 am, Hindustan Petroleum Corporation (HPCL) was trading nearly six and a half per cent higher at Rs 176 a piece on BSE while Bharat Petroleum Corporation (BPCL) was trading at Rs 274, up 3.32 per cent. Shares of IndianOil was trading over 4 per cent higher at Rs 123.05.

Investor confidence in public sector oil and gas companies and OMCs took a massive hit last week after the government announced cut in excise duties in petrol and diesel prices by Rs 2.50 per litre and asked the refiners to absorb a Re 1 per litre cut in excise duty on petrol and diesel.

After the announcement, global brokerages such as Goldman Sachs and Citigroup Global Markets downgraded the stocks saying the imposition of price controls was an 'unequivocal negative' that underscores 'high political risk' associated with state-owned enterprises.

Petrol prices see another cut: Here's what you will pay in top cities today

Fuel prices, for the tenth consecutive day, was marginally lowered on Friday. As per prices announced by largest retailer Indian Oil Corp (IOC), petrol prices fell around 21 paise in the four metro cities, while diesel prices were down by around 15 paise.

In Delhi, petrol per litre on Friday cost Rs 77.42, down from 77.63 on Thursday. Similarly, in Mumbai and Kolkata, petrol prices were at Rs 85.24 and Rs 80.07 a litre respectively. In Chennai, petrol fell by 22 paise to Rs 80.37 per litre.

Diesel prices were down by 15 paise in Delhi, Mumbai and Kolkata. In Chennai, its price was down by 16 paise.

On Thursday, petrol prices were reduced by 9 paise, while diesel prices were cut by 7 paise in Delhi.

Even after ten consecutive price cuts, fuel prices continue to remain at high levels following the resumption of daily price changes after a 20-day suspension of the system last month owing to the Karnataka elections.

Modi has an oil price headache and Saudi Arabia may just make it worse

India’s Prime Minister Narendra Modi has an oil problem. And it’s set to worsen with Saudi Arabia rooting for the commodity to push through the $80 barrier.

Modi’s government made the most of cheap oil by substituting any fall in prices with taxes that kept retail fuel rates unchanged for consumers and boosted the federal revenue. Now, pressure is mounting to forego some of that windfall as pump prices of gasoline and diesel hit records, likely marring the ruling party’s prospects at the national ballot in 2019.

“There is a strong case for the central government to take another excise duty cut, and ask state governments to reduce value added tax,” Anil Sharma and Ravi Adukia, analysts at Nomura Financial Advisory and Securities India Pvt. wrote in a note Tuesday.

Fuel prices have started to pinch as Brent, the benchmark for more than half of the world’s oil, hit $80 a barrel last week. It’s still short of its all-time high of $147.50. But cutting local taxes, which account for more than half of the retail gasoline and diesel prices, would stretch government finances at a time when the subsidy burden on kerosene and cooking gas is climbing.