On Friday, shares of petroleum companies rallied by as much as 4.50 percent as crude oil prices dropped afresh. Through the session, Hindustan Petroleum, Indian Oil and Bharat Petroleum stocks climbed up to 4.5%. The latest slide dragged crude oil prices down to their lowest level in 2 months. Crude prices have weakened largely because confidence in a possible peace agreement between the US and Iran has grown.
Bharat Petroleum Stock Rises Up to 4.5 Percent
On the BSE today, the Hindustan Petroleum share advanced 3.5% to touch its intraday high of 379 rupees, while Indian Oil stock gained 3% and reached 138 rupees per share. The sharpest move came in Bharat Petroleum, which surged a bumper 4.5% to hit 295 rupees.
US-Iran Deal Possible by This Weekend
US President Donald Trump has said a deal with Iran could be reached by this weekend. In a post on 'Truth Social', Trump said he halted the strikes after talks reached the highest level of the Iranian leadership and approval came through from there. He added that the key points of the proposed agreement have been approved "in principle and in detail" by several parties, including the US, Israel, Saudi Arabia, the UAE, Qatar, Turkey, Pakistan, Bahrain, Kuwait, Jordan and Egypt.
Crude Oil Prices Decline
Following Trump's statement, Brent crude futures fell 1.21 dollars, or 1.3%, today to 89.17 dollars per barrel, while US West Texas Intermediate (WTI) crude dropped 1.23 dollars, or 1.4%, to 86.48 dollars per barrel. After closing at a 2-month low in the previous session, Brent crude tumbled nearly 2% as the market opened, sinking to a low of 88.79 dollars per barrel, while WTI crude was trading around 86 dollars per barrel.
Rising Crude Prices Put Pressure on Oil Company Stocks
It is worth noting that when oil prices climb, the shares of oil marketing companies come under pressure, because their input costs begin to rise sharply while their ability to pass these costs on to customers remains largely limited. These companies buy crude oil at higher prices, refine it, and then sell it as petrol and diesel. However, prices are often controlled, so the entire cost cannot be loaded onto consumers. As a result, when product prices do not rise in line with crude oil prices, the margins of oil companies shrink.
Returning to Normal Could Take Several Months
Experts believe that even if an agreement is struck between the US and Iran and energy supplies through the Strait of Hormuz resume, it could still take several months for the current situation and the damaged energy infrastructure to fully return to normal.
