The shares of these oil marketing companies have seen a significant drop recently, as oil prices soared to multi month highs since the outbreak of the war after the US and Israel conducted military strikes on Iran, killing its former supreme leader Ayatollah Khamenei, followed by massive retaliation from Tehran.
Mojtaba Khamenei, Iran’s new supreme leader and son of Ayatollah Khamenei, called the Strait of Hormuz a strategic “tool of pressure” that must remain shut amid the war. In a message on state television, Mojtaba Khamenei warned that US bases across the region can face attacks as Iran seeks revenge for the deaths caused by the conflict.
Oil prices soared as a result of rising expectations of continued closure of the Strait of Hormuz, which remains a critical chokepoint for trade. The narrow 33 kilometre long waterway connects the Persian Gulf and the Gulf of Oman, and carries over 20% of the world’s oil and gas shipments.
Brent crude futures gained nearly 0.7% to $101.1 per barrel, while WTI crude gained around 0.6% to $96.29 per barrel, as seen at 8.30 am IST. Crude oil prices crossed the key psychological mark of $100 on Monday for the first time since Russia’s invasion of Ukraine in 2022. Oil prices cooled later, falling below the $90 mark on hopes of a sooner end to the raging war. However, prices have again surged on the back of rising hostilities and sharp warnings from Tehran’s new leadership.
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US partially allows Russian oil purchases
Notably, today’s rise in prices comes despite the US administration led by President Donald Trump issuing a 30 day licence for countries to buy Russian oil and petroleum products stranded at sea. US Treasury Secretary Scott Bessent, in a statement on X released hours after benchmark oil prices shot above $100 a barrel to their highest in nearly four years, said the measure would not provide significant financial benefit to the Russian government, which faces sanctions following its invasion of Ukraine.Additionally, the US Energy Department had said the country would release 172 million barrels of oil from the strategic petroleum reserve in an effort to curb skyrocketing oil prices, as part of the broader commitment by the International Energy Agency to release 400 million barrels of oil.
Iran has been launching attacks on oil tankers and has warned that the world should be ready for oil prices to hit $200 a barrel. “Get ready for oil to be $200 a barrel, because the oil price depends on regional security, which you have destabilised,” said a spokesperson for Iran’s military command earlier.
OMCs can face margin pressure, cash flow volatility: Moody’s Ratings
India’s state owned oil marketing companies (OMCs) can face heightened margin pressure and cash flow volatility as global energy prices rise while domestic fuel prices remain largely unchanged, according to a report by Moody’s Ratings.
The agency said that the country’s three largest fuel retailers IOC, BPCL and HPCL will likely continue absorbing higher input costs stemming from elevated global crude and gas prices.
When international oil prices rise, procurement and refining costs increase sharply while retail prices for petrol and diesel remain unchanged, compressing marketing margins and weakening operating cash flows.
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