Oil marketing and aviation companies’ share prices fell 2-3 percent on Tuesday following sharp rise in crude oil prices in international market.
HPCL, BPCL and IOC declined 2-3 percent while Jet Airways, SpiceJet and InterGlobe Aviation (IndiGo) were down 2 percent each.
Oil retailers are allowed to make changes in petrol and diesel prices on daily basis, tracking international crude oil prices but it won’t be possible for them to increase it sharply when oil prices, like today, are trading at highest level since 2015.
As the state elections lined up before general elections 2019, it is difficult for the government also to allow oil marketing companies hike petrol and diesel prices sharply. So these PSU companies have to bear that burden and that is why stocks are correcting.
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Any increase in crude oil prices is always bad for aviation companies as oil retailers always pass on hike first to aviation. It is the key cost for aviation companies, so any increase in that cost hit their financials.
Brent crude oil prices jumped above USD 65 per barrel for the first time since 2015 after the shutdown of the Forties North Sea pipeline knocked out significant supply from a market that was already tightening due to OPEC-led production cuts.
Brent crude futures, the international benchmark for oil prices, were at USD 65.65 a barrel at 11:28 hours IST, up 1.45 percent, from their last close. That marks the first time Brent has risen above USD 65 since June, 2015.