Oil Marketing Companies Set for Earnings Recovery Amid West Asia Tensions

Despite ongoing tensions in West Asia and President Donald Trump's recent call for sanctions against entities doing business with Iran, oil marketing companies (OMCs) are poised to recover earnings in Q2. Brent crude prices have dropped by 12% from their highs in the June quarter, which should benefit OMCs.

The International Energy Agency has projected a surplus in oil supplies for CY27, improving the medium-term outlook for OMCs. The agency's forecast is based on the US and China reducing their inventory drawdowns and stabilizing global markets.

Indian Oil Corp. Ltd (IOC), Bharat Petroleum Corp. Ltd (BPCL), and Hindustan Petroleum Corp. Ltd (HPCL) are expected to post strong Q2 results, thanks in part to lower crude prices and reduced freight costs. HPCL's earnings could also be boosted by its ongoing expansion.

Refining margins have been supported by lower throughput due to damaged refineries from the conflict and China's export curbs. However, shares of OMCs have declined 17-27% since the West Asia conflict began on February 28.