Share Market Today: Shares of oil marketing companies (OMCs) like Bharat Petroleum Corporation Limited (BPCL), Hindustan Petroleum Corporation Limited (HPCL) and Indian Oil Corporation Limited (IOC) will remain under pressure on Monday amid the ongoing conflict between Iran, US and Israel in the Middle East.

The upward trend may continue in upstream stocks like Oil and Natural Gas Corporation Limited (ONGC), GAIL and Oil India. Investors will keep their eyes on the shares of oil marketing companies today after Brent crude increased by 10 percent to $ 80 per barrel in over-the-counter trade.

Oil companies in profit

Brokerage Emkay Global says that this rise in oil prices can benefit upstream stocks like ONGC and Oil India. However, profits may reduce slightly due to windfall tax. In fact, due to increase in crude oil prices, the revenue of companies like ONGC and GAIL also increases.

These companies extract crude oil and gas from the ground and sell them in the international markets at prevailing prices. Now when oil becomes expensive worldwide, their selling price per barrel also increases. Companies also benefit because even if oil prices increase, there is no change in the expenses incurred on drilling and extracting it. Now when the costs remain the same and the selling price increases, profit is inevitable. According to experts, every $1 increase in the price of crude oil per barrel can increase the annual revenue of companies like ONGC and GAIL by Rs 300-400 crore.

Pressure on oil marketing companies

Brokerage firm JP Morgan said that higher oil prices are positive for upstream companies like ONGC, but negative for oil marketing companies like BPCL, IOCL and HPCL. Shares of oil marketing companies like BPCL, IOCL and HPCL will be under pressure today because if oil prices rise, then of course producing companies like ONGC and GAIL benefit. But marketing companies remain in loss because they buy crude oil at international prices, but since the prices of petrol and diesel in the country are often kept constant, they are not able to make profits.

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Oil Prices: Amidst the attacks by America and Israel on Iran, the prices of crude oil have increased by 10 percent in the global market. With the opening of the Asian market on Sunday, a strong increase of 10 percent was seen in the prices of crude oil.

The prices of both Brent crude and Nimex light sweet crude rose sharply in early trading on Monday. At one point, Brent jumped by more than 12 percent to around $ 82 per barrel, which is higher than the closing price of $ 73 per barrel on Friday. However, later there was some softening in both of them.

Prices increased suddenly

By Monday morning in Asian markets, crude oil was seen trading at around $79.30 with an increase of almost 9 percent. During this period, US crude rose by almost $ 8 or 12 percent to $ 75 per barrel, while West Texas Intermediate rose by almost 8 percent to $ 72.

This year already a rise in oil prices is being seen. International benchmark prices have increased by about 20 percent since January. On top of that, the rise in oil prices again is worrying. Experts have warned that if prices increase further, the cost of energy may increase further. However, this will depend on Iran’s retaliation and obstacles on the supply route.

Concerns about the Strait of Hormuz

Of particular concern is the Strait of Hormuz, which is a narrow passage located at the mouth of the Persian Gulf. This is the only sea route that connects the Persian Gulf to the Gulf of Oman or the Arabian Sea. It has Iran in the north and Oman and United Arab Emirates in the south.

The Strait of Hormuz is also called the gateway to the Persian Gulf because through this narrow route the world’s major producing countries like Saudi Arabia, Kuwait, Qatar, Iraq send their oil out. Every day about 15 million barrels of crude oil passes through this route, which is about one-fifth of the world’s supply.

India also imports a large part of its crude oil needs through this route. There are fears that this route will be closed due to the war between Iran and Israel. In such a situation, the speed of shipment may slow down or stop completely. This may ban exports and increase the prices of crude oil and petrol across the world.

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