Shares of BPCL, HPCL and Indian Oil rose 4% in early trade on March 16 after Brent crude fell below the $75-a-barrel mark for the first time since 2021.

Bharat Petroleum was quoted at Rs 342.70 at 9:30 am, up 3.7% from the previous close. HPCL rose 4% to Rs 240, and Indian Oil rose 1.65% to Rs 79.80.

The profitability of oil marketing companies (OMCs) will take a hit in 2022 as they must maintain oil prices despite higher crude prices.

The OMC normally revises retail gasoline and diesel prices daily based on a rolling average of the past 15-day international benchmark price. However, they kept prices on hold through 2022 despite surging crude oil prices to keep inflation in check in the country, weakening their bottom line.

Rating agency Moody’s said: “As international oil prices cool, the marketing losses of the three major state-owned refining and marketing companies, IOC, BPCL and HPCL, will ease.”

Shares of upstream companies such as ONGC and Oil India were hit hard. ONGC shares were down 2.5% at Rs 148.50 on the NSE, while Oil India was down 3% at Rs 250 at around 9:45 am.

According to analysts’ calculations, every $1 per barrel gain in crude would mean a 2-4% increase in earnings per share for both companies. Therefore, a drop in crude oil prices is bad news for them.

Oil India’s dividend yield is 5.5%, and its shares are up 17% this year. Meanwhile, ONGC, which has a 6.7% dividend yield, has returned flat in 2023.