OMC stocks under pressure as US Iran war impacts earnings

Oil marketing companies are in focus as rising crude oil prices triggered by the US Iran war weigh heavily on earnings expectations for the March quarter. Shares of major public sector refiners have already declined between 18 percent and 32 percent during the quarter, reflecting investor concerns over profitability.

The impact is being felt across key players such as Indian Oil Corporation, Bharat Petroleum Corporation Limited, and Hindustan Petroleum Corporation Limited, with analysts warning of margin pressure despite some support from refining gains.

US Iran war impact on OMC earnings outlook

The US Iran war impact has pushed crude oil prices higher following disruptions around the Strait of Hormuz, significantly affecting downstream oil companies. The situation has created uncertainty around earnings, especially for companies dependent on retail fuel margins.

Higher crude prices, along with currency depreciation, have reduced profitability in fuel retailing. At the same time, government policies requiring stable fuel prices have limited the ability of companies to pass on increased costs to consumers.

OMC Q4 earnings likely to decline sharply

The OMC Q4 earnings outlook remains weak, with estimates pointing to a sharp drop in profitability. According to ICICI Securities, profit after tax may fall by 56 percent year on year, while EBITDA could decline by as much as 82 percent.

Retail fuel margins have come under pressure, with petrol margins at around ₹2.9 per litre and diesel seeing losses of about ₹6 per litre during the quarter. Rising global crude prices and rupee depreciation have contributed to this decline.

Additionally, LPG under recoveries have surged due to higher input costs. Estimates suggest losses in the range of ₹11,000 crore to ₹12,000 crore, driven by rising international prices of propane and butane.

Refining margins provide partial support

Despite the challenges, refining operations have offered some relief. Gross refining margins have improved, with Singapore benchmarks rising by around $3.5 per barrel during the quarter.

However, the benefit has been limited by policy measures. The government prioritised supply of petrol, diesel, and LPG without increasing retail prices, adding pressure on margins. Export duties on diesel and aviation fuel have also restricted the ability of companies to fully capitalise on strong refining spreads.

BPCL HPCL IOC Q4 preview shows mixed trends

The BPCL HPCL IOC Q4 preview reflects a mixed outlook across companies, with analysts divided on performance expectations.

For Bharat Petroleum Corporation Limited, some estimates indicate a sharp drop in profit, while others expect modest growth. Operational performance is likely to be supported by better refining margins and reduced LPG losses, though marketing margins remain weak.

Hindustan Petroleum Corporation Limited is expected to face significant pressure, with some estimates pointing to a quarterly loss and steep declines in both profit and EBITDA.

Indian Oil Corporation presents a more stable picture, with certain estimates suggesting moderate growth in profit and sales, while others forecast a decline due to similar headwinds affecting the sector.

Which OMC stock to buy ahead of Q4 results

Market experts suggest that stock selection remains crucial in the current environment shaped by the US Iran war impact.

Among the three, Bharat Petroleum Corporation Limited is seen as relatively better positioned due to stronger refining margins, improved operational efficiency, and a cleaner balance sheet.

Indian Oil Corporation is considered suitable for conservative investors looking for stability and consistent dividends, while Hindustan Petroleum Corporation Limited may appeal to investors seeking higher risk and potential upside despite volatility.

Some analysts have also turned positive on Hindustan Petroleum Corporation Limited following recent price corrections and improving operational outlook.

Conclusion

The US Iran war impact has created a challenging environment for oil marketing companies, with rising crude prices and policy constraints weighing on profitability. While refining margins offer some support, the overall OMC Q4 earnings outlook remains weak. Investors are likely to remain cautious, focusing on company-specific strengths as the sector navigates ongoing global and domestic pressures.