MRPL, CPCL, Oil India, ONGC, Adani Total fall up to 19%; here’s why

Shares of oil marketing companies saw sharp selling on Monday, with stock prices falling up to 19% in intraday trade after international crude prices slide about 5% to hit a three-week low on Friday. Crude prices tumbled to its lowest since May 23, 2022, at $113 per barrel, on account of demand concerns. The oil prices retreated on worries that interest rate hikes by the U.S. Federal Reserve as well as other major central banks could slow the global economy and cut demand for energy. The market sentiment was further dented after the U.S. announced new sanctions on Iran which aggravated supply concerns.

The S&P BSE Energy index dropped as much as 2.9% to hit a multi-year low of 7,439.97 levels on the BSE in intra-day trade today, led by Mangalore Refinery & Petrochemicals (MRPL), which plunged 19% to hit an intraday low of Rs 76.85. In comparison, the S&P BSE Sensex was down 165 points at 51,525 levels at the time of reporting. Shares of Chennai Petroleum Corporation (CPCL) also dived 16%, followed by 11% loss on the BSE. In the calendar year 2022, CPCL shares rallied 157%, while MRPL stock price jumped 75%.

Among others, index heavyweights Oil India, Oil and Natural Gas Corporation (ONGC), GAIL India, BPCL, Adani Total Gas, Petronet LNG, and Reliance Industries fell between 1% to 11% during the session so far.

At the time of reporting, the Brent and U.S. crude futures were trading marginally higher, reversing early losses. The Brent crude oil for August delivery was up 0.3% to $113.45 per barrel, while the U.S. West Texas Intermediate (WTI) crude August futures rose 0.32% to $108.34 a barrel.

The market sentiment was lifted amid a report that Russia expects its oil exports to increase in 2022 despite western sanctions and a European embargo. Adding to it, the first export of crude from Venezuela to Europe in more than two years also eased supply concerns.

On Friday, the WTI crude oil prices retreated almost 6% as investors remained jittery amid growing fear that the central banks’ policy stance to curb inflation may push the global economy into recession. The restrictive measures in China in the wake of fresh Covid-19 cases and looming fear about global economic growth raised concerns about the demand outlook.

Going forward, crude oil prices are expected to trade with a negative bias on an expectation of oil supply resume from Venezuela.