Rising Oil Prices Hit Energy Stocks

A sharp rise in global oil prices, caused by the ongoing war in West Asia, has once again brought oil and gas stocks into focus. Analysts say the conflict is creating supply pressure in global energy markets and could lead to gas shortages in the near future.

Experts believe this situation will affect oil refiners, companies involved in the gas supply chain, city gas distributors, and oil marketing companies (OMCs).

Sumit Pokharna, Vice President of Fundamental Research at Kotak Securities, said that even if countries manage to secure crude oil from alternative sources, the overall cost of buying and transporting oil will increase sharply. This means companies will have to spend more money to maintain supplies.

For oil marketing companies such as Indian Oil Corporation, Bharat Petroleum Corporation Limited, and Hindustan Petroleum Corporation Limited, the situation could be more difficult. Since retail fuel prices are mostly controlled and not immediately raised, higher crude oil and transportation costs could reduce their profit margins. According to the analyst, this makes future earnings less predictable.

Gas transmission and LNG import companies like GAIL and Petronet LNG Limited may also face problems. They could see reduced gas volumes and higher costs for importing liquefied natural gas (LNG). This would put pressure on both their sales volumes and profits.

City gas distribution companies such as Indraprastha Gas Limited, Mahanagar Gas Limited, and Gujarat Gas might also struggle. They could face higher input gas prices, possible supply cuts, and lower margins. At the same time, they must deal with regulatory rules and competition, which limit their ability to increase prices quickly.

The analyst described the current situation as a “transit shock” rather than just a temporary price increase. This means that disruptions in supply routes and logistics are creating deeper structural challenges for the energy sector.

Based on this outlook, the analyst has maintained a “Sell” rating on three oil marketing companies — IOC, BPCL, and HPCL — as well as on GAIL, Petronet LNG, Indraprastha Gas Limited (IGL), and Mahanagar Gas Limited (MGL).

Overall, the ongoing geopolitical tensions are expected to keep energy markets volatile, with investors closely watching how companies manage rising costs and supply disruptions.