Why India's Oil Stocks Are Rebounding After Falling For 3 Straight Days

Shares of India’s state-run oil refiners Hindustan Petroleum Corporation (HPCL), Bharat Petroleum Corporation (BPCL) and Indian Oil Corporation (IOC) were gaining on Thursday as oil prices rebounded.

What Happened: This rally follows three consecutive days of decline in crude oil prices, driven by growing optimism surrounding a potential ceasefire agreement in the Middle East. Additionally, increased crude inventories and production within the US, the world’s largest oil consumer, have contributed to the downward trend in oil prices.

However, global broking firm CLSA recently downgraded HPCL, BPCL and Indian Oil, maintaining its “sell” recommendation on all three companies.

ICICI Securities in March had suggested that while negative reactions might be expected, it could present an opportunity to enter the market and build positions due to the solid underlying business case.

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Oil Slips: Brent crude futures for July fell by 47 cents, or 0.5%, to $85.86 a barrel, while US West Texas Intermediate crude for June declined by 53 cents, or 0.6%, to $81.40 per barrel.

According to Reuters, US crude oil inventories increased by 4.906 million barrels last week, while gasoline and distillate stockpiles decreased. Gasoline inventories fell by 1.483 million barrels, and distillates fell by 2.187 million barrels. Official data from the EIA is expected at 10:30 a.m. EDT.

Signs Of Recovery: US crude supply has shown signs of ramping up, with production rising to 13.15 million barrels per day (bpd) in February from 12.58 million bpd in January, marking its biggest monthly increase in about 3 and half years, as reported by the Energy Information Administration.

Optimism for a ceasefire agreement between Israel and Hamas, led by Egypt, has also contributed to the decline in oil prices. An end to the conflict would alleviate concerns of supply disruption from the Middle East.

Additionally, output by the Organization of the Petroleum Exporting Countries (OPEC) was seen falling by 100,000 bpd in April to 26.49 million bpd, reflecting lower exports from Iran, Iraq, and Nigeria amidst ongoing voluntary supply cuts by some members agreed with the wider OPEC+ alliance.

Price Action: HPCL’s share price was up 7.55% at ₹532.55, BPCL’s shares had climbed 4.67% to ₹635.70 and IOCL shares jumped 2.61% to ₹173.25 near the close of trade on Thursday.

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Posted In: EquitiesCommoditiesMarketsMoversTrading IdeasBharat PetroleumHindustan Petroleum Corporation (HPCL)Indian Oil Corporation