HPCL and BPCL Shares Surge to 52-Week Highs Amid Falling Brent Crude Prices

Shares of oil marketing giants Hindustan Petroleum Corp (HPCL) and Bharat Petroleum Corp (BPCL) reached their highest levels in 52 weeks on September 2, buoyed by a notable decline in Brent crude prices. This downward trend in crude prices is expected to improve the margins of these companies, making their stock more attractive to investors.

By 12:26 pm, HPCL's shares were trading 4% higher at ₹435.60 on the National Stock Exchange (NSE), after reaching an intraday peak of ₹438. Similarly, BPCL shares saw a 1% rise, trading at ₹367.20, following a 52-week high of ₹367.20 intraday. Indian Oil Corp shares also experienced gains, trading up by 1.5% at ₹179.63.

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Brent crude prices have dropped nearly 7% over five sessions, primarily due to decreased demand from China, the world’s largest importer of oil. Additionally, expectations of an output increase by OPEC+ starting in October have exerted further downward pressure on oil prices. According to a Reuters report, the Organization of the Petroleum Exporting Countries and its allies (OPEC+) plan to increase oil output by 180,000 barrels per day in October as part of their strategy to gradually unwind previous cuts while maintaining some reductions until the end of 2025.

This shift has driven Brent crude prices down from over $80 per barrel to approximately $76 per barrel. Goldman Sachs has also forecasted a potential further dip to $68 per barrel by the end of 2025 if China's oil demand remains flat through the next year.

Lower crude prices benefit oil marketing companies (OMCs) like HPCL and BPCL in several ways. Firstly, reduced input costs allow them to maintain or increase the prices of refined products such as petrol and diesel, leading to higher margins. Moreover, OMCs may benefit from inventory gains as they replenish their stock at reduced prices. Additionally, lower fuel costs could spur consumer demand, resulting in increased sales volumes and improved revenues for these companies.