Indian refineries tumble as crude prices surge on the escalating Iran war
The shares of Indian'refiners' fell on Monday as the escalating 'U.S.-Israeli conflict with Iran pushed Brent crude to $120 per barrel, a price that is a near four-year-high. This threatens their short-term earnings.
Indian Oil, a state-run company, fell 6.6%. Hindustan Petroleum fell 7.5%. Bharat Petroleum plunged 7.1%. These were the steepest drops in over a year.
Reliance Industries has lost 2%.
Brent crude rose?as high as 26.4%, to $117.16 per barrel. It was up last?23% by 9:15 am IST.
UBS stated that oil marketing companies were "negatively 'leveraged'" by the crude price spike, as they sold more diesel and gasoline than what they produced. They estimated sales-to production ratios of 1:2 for IOC, BPCL and HPCL.
The brokerage changed BPCL from "buy" to "neutral", and IOC to "neutral".
The Nifty oil index fell 2.7%, and the Nifty energy index by 2.1%. Meanwhile, the benchmark Nifty 50 dropped 2.8%. Since the U.S. and Israeli strike on Iran, February 27, the?oil-and-gas index has dropped 6.6%.
Citi warned that refiners' profits will depend on the length of time the 'geopolitical' shock lasts. They also flagged risks from the potential closure of Strait of Hormuz, and the possible shutdown of Qatar's gas output. Both of these supply about half of India's imports of crude oil and LNG.
The brokerage said that any disruption beyond the month of?pricing currently in place could lead to a sharp tightening of?LNG market, and the low storage capacity for October 2026 would raise the risk "non-linear price spikes". (Reporting and editing by Sumana Nady in Bengaluru, Yagnoseni das in Bengaluru)
(source: Reuters)
