Friday, June 13, 2014
OMC stocks crack upto 9% as crude oil tops $115 a barrel
[Editor: However, this is good news for the upstream oil (exploration) companies like ONGC (Rs.422.245), Shiv-Vani Oil and Gas Exploration Ltd (Rs.22.70), etc]
MUMBAI: Shares of oil marketing companies such as BPCL, IOCL and HPCL slipped as much as 8 percent as international crude oil prices shot up on concerns of supply disruption following tensions in Iraq.
According to reports, militants have seized control of Mosul in northern Iraq and are seen headed for capital Baghdad. Iraqi Oil Minister Abdul Kareem Luaiby's assurance that violence is unlikely to reach oil fields in southern Iraq has been of little help.
Oil prices have moved higher on international bourses after a jump of 2 per cent in previous session. The brent crude oil shot up to 9-month high and was trading over $114 per barrel, up 0.65 per cent and crude oil was up 0.65 per cent at $107.22 per barrel. Brent futures rose towards $114 a barrel on Friday on supply concerns.
Around 85 per cent of India's crude requirement is imported and any spike in international prices is likely to have economic implications. After coming to power, Prime Minister Narendra Modi-led government continued with previous government's policy and hiked diesel price by 50 paise per litre.
If the crude oil prices remain elevated, it will be difficult for the government to completely de-regulate diesel as it will fuel inflation. On the other hand, allowing domestic prices to remain unchanged threatens to increase in subsidy burden.
However, analysts are of the view that crude price hike is not a big concern as of now.
"If crude prices go up, it is clearly not good for an importing country like India. However, year on year, the increase is still very low. So while you may be at a nine-month high, it has traded in this range for some length of time," said Prateek Agarwal of ASK Investment Manager to ET Now.
"So, in a way, that is fine. As an economy, we grow 13-14% in nominal terms. Even if crude goes up by 1-1.5-2%, the growth of the economy can still take it into its stride," he added