Oil Marketing Company Stocks Fall On Iran Sanctions

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Shares in oil marketing companies fell, after the US said that it will withdraw from the Iran nuclear deal and reinstate financial sanctions on Iran.

Oil Marketing Company Stocks Fall On Iran Sanctions
This means that there would be fresh restrictions on Iran export of crude, pushing crude oil prices higher as supplies from the country would be curbed. Higher crude prices would also mean a margin squeeze for oil marketing companies, like HPCL, BPCL and Indian Oil.

Shares of HPCL were down 3 per cent, while BPCL and IOC dropped 2 per cent each, in early morning trade.

The problem also for these oil marketing companies is the fact that the government has not allowed these companies to align petrol and diesel to market rates. This is largely on account of elections in the state of Karnataka. With central government elections slated next year and also election to key states like Rajasthan and Madhya Pradesh, it is likely that we will see oil marketing companies being burdened.

They might be forced to bear the brunt of rising crude, without being allowed to raise prices at the retail level. Alternatively, the government may cut excise duties, but, that may not be possible, given the fragile nature of government finances at the moment.


Read more about: hpcl bpcl ioc
Story first published: Wednesday, May 9, 2018, 10:10 [IST]
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