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Key Points

The Middle East crisis could push crude prices higher, posing risks to Indian oil marketing companies' earnings. ICICI Securities notes OMCs face material impacts even at current crude levels while upstream firms may benefit. LNG price hikes linked to crude could further squeeze gas utilities. Analysts warn any escalation in tensions or supply disruptions would worsen the outlook for OMCs.

Key Points: Middle East Crisis Risks Indian Oil Marketing Companies Earnings

  • Middle East tensions threaten crude supply through Strait of Hormuz
  • Current crude rebound still below FY25 average prices
  • LNG-linked input costs may squeeze gas utilities
  • Upstream firms could gain while OMCs face earnings risk
3 min read

Any escalation in Middle-East crisis or sharp rise in crude prices will impact India's Oil Marketing Companies: Report

ICICI Securities warns rising crude prices due to Middle East tensions could hurt Indian OMCs while benefiting upstream firms.

"We estimate a material impact on OMC earnings and upside risk to upstream earnings even with crude at USD 73-74/bbl - ICICI Securities Report"

New Delhi, June 16

Any further escalation in the Middle-East crisis or a sharp rise in crude prices could pose a serious risk to earnings, especially for Indian Oil Marketing Companies (OMCs) and gas companies.

However, Indian OMCs and gas companies are currently facing mixed impacts from the ongoing volatility in crude oil prices.

According to a report by ICICI Securities, even with crude currently trading at USD 73-74 per barrel, there is already a material impact on the earnings of oil marketing companies (OMCs), while upstream companies could see some upside.

The report stated, "We estimate a material impact on OMC earnings and upside risk to upstream earnings even with crude at USD 73-74/bbl as is the case now".

It also noted that any further spikes in crude prices are unlikely to significantly boost upstream company earnings but could negatively affect OMCs and gas companies.

This is because the price of LNG, which is linked to crude, will also rise steadily, increasing input costs for gas utilities.

Despite these developments, the report stated that analysts of crude have not made any changes to their estimates or views for now. They plan to monitor the crude oil markets closely over the next few weeks before taking a more definitive stance on the oil and gas coverage universe.

The report highlighted that the current rebound in crude prices remains lower than the average crude prices recorded in FY25 and well below the last four-year average.

As a result, the overall impact on the profitability of Indian oil and gas companies is not considered unreasonable at this stage.

However, the report acknowledges the sharp movements in stock prices of energy companies, reflecting market concerns about the Middle East situation. A major concern is the potential disruption of oil and gas shipments through the strategic Strait of Hormuz.

There is also some fear, although remote, that NATO could be drawn into the conflict if Iran targets any Western military bases in the region.

Currently, Brent crude is priced around USD 75 per barrel, which is about USD 6-7 per barrel higher than the analysts' FY26 estimate of USD 68.

As per the report, this presents a downside risk to earnings per share (EPS) estimates for OMCs, while upstream companies may benefit.

Still, crude prices remain USD 9 below the average of FY22-25 and USD 4 below the FY25 average, indicating that supply remains adequate and demand concerns continue to weigh on the market.

For now, the report maintained the estimates but warned that any further escalation in the conflict or a sharp rise in prices could pose a serious risk to earnings, especially for OMCs and gas companies.

- ANI

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Reader Comments

Here are 6 authentic Indian perspective comments for the article:
R
Rahul K.
This is concerning for our economy. Every time crude prices rise, it affects everything from petrol prices to inflation. Government should think about long-term solutions like increasing our strategic reserves and alternative energy sources. 🇮🇳
P
Priya M.
Why are we still so dependent on imported oil? The Middle East crisis shows we need to speed up our renewable energy plans. Solar and wind energy investments should be priority now. #MakeInIndia should include energy independence too!
A
Amit S.
Middle East tensions always hit common people hardest. Petrol prices go up, then everything from vegetables to transport becomes costly. Government should absorb some shock instead of passing everything to consumers.
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Neha T.
The report seems balanced. While upstream companies may benefit, OMCs will suffer. As an investor, I'm worried about my stocks in IOC and BPCL. Maybe time to diversify portfolio towards renewable energy companies? 🤔
S
Sanjay V.
We need better diplomacy in Middle East to protect our energy interests. India imports 85% of its oil needs! This vulnerability affects our economic growth. Time to strengthen ties with oil producing nations and explore Russian oil more.
K
Kavita R.
The government should consider reducing taxes on fuel if prices rise too much. Last time crude was at $140, we suffered badly. Middle class is already struggling with inflation. Hope authorities have contingency plans ready this time.

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