Oil and gas stocks witnessed severe selling pressure on Friday despite the government's approval of a ₹3 per litre hike in petrol and diesel prices, along with a ₹2 per kg increase in CNG prices. According to latest reports, among the biggest losers, Gujarat State Petronet plunged over 7%, while Hindustan Petroleum Corporation Limited (HPCL) fell nearly 2%, Bharat Petroleum Corporation Limited (BPCL) declined around 1.9%, and Indian Oil Corporation Limited (IOCL) slipped over 1.4%. Reliance Industries Limited (RIL) also traded lower by nearly 1.4%, with the sell-off being broad-based across all major energy companies despite the broader market trading higher. The sentiment was dented amid concerns that the fuel price increase was lower than market expectations, even as crude oil prices continued to hover around the $100 per barrel mark.
Oil marketing companies on May 15 raised petrol and diesel prices by over ₹3 per litre each, marking the first fuel price revision in more than four years as state-run retailers struggle with mounting losses amid elevated global crude oil prices. As reported by Moneycontrol, the increase falls short of market expectations at a time when global crude oil prices continue to remain elevated, contributing to subdued investor sentiment. The price hike ends a symbolically important four-year freeze, but analysts believe it is not enough to restore OMC profitability at current crude price levels. Latest reports indicate that Delhi: Petrol at ₹97.77, diesel at ₹90.67 per litre, Kolkata: Petrol at ₹108.74 (from ₹105.45), diesel at ₹95.13 per litre, and Chennai: Petrol at ₹103.67 (from ₹100.80), diesel at ₹95.25 per litre. Petrol and diesel prices had remained largely unchanged since April 2022, barring a one-time ₹2 per litre cut announced ahead of the 2024 Lok Sabha elections.
Earlier this week, Union Petroleum Minister Hardeep Singh Puri, speaking at the CII Annual Summit on May 12, said Indian oil companies are currently losing nearly ₹1,000 crore every day, adding that total under-recoveries could touch ₹1,98,000 crore. According to Moneycontrol, following the latest hike, market watchers are now speculating that further fuel price increases cannot be ruled out if crude prices remain at current levels. At prevailing crude oil prices, OMCs were estimated to be incurring losses of around ₹20 per litre on petrol and nearly ₹100 per litre on diesel, with the cumulative under-recovery for the quarter alone expected to surge to nearly ₹2 lakh crore. India's heavy dependence on crude imports, with the country importing nearly 85% of its crude oil requirement, leaves it highly exposed to global energy disruptions and supply chain risks. As per Elara Capital, companies are currently losing ₹9-₹10 per litre, with the short term expected to be volatile and potentially featuring a bad first quarter.
Analysts broadly agree that the current increase is insufficient to restore the financial health of OMCs. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, noted that the decision to increase petrol and diesel prices by ₹3 per litre and CNG by ₹2 per kg indicates the government is playing it safe through small increases, perhaps stage by stage, without triggering a sharp spike in cost-push inflation. However, analysts caution that if crude prices remain elevated over the coming months, further rounds of fuel price hikes may become unavoidable. Emkay Global Financial Services estimates that current under-recoveries stand at around ₹18-20 per litre on petrol and diesel at prevailing crude prices, with the brokerage having expected an initial fuel price increase of nearly ₹10 per litre to partly offset losses. Emkay estimates cumulative increases could eventually reach ₹18-20 per litre over the next three to six months if global oil prices continue to stay above $100 per barrel.
