Falling crude oil boon for downstream cos, bane for upstream

MUMBAI: Shares of upstream oil & gas companies fell Friday on continued decline in crude oil prices while downstream companies gained from the same, as a drop in crude prices improves the earnings outlook for the oil and gas marketing companies.

At 10:45 am, BSE Oil & Gas Index was down 0.66 per cent. ONGC dropped 4.21 per cent, Cairn India fell 4.57 per cent and Reliance industries slipped 1.57 per cent.

The petroleum ministry had earlier this month cut petrol price by Rs.5 a litre and diesel by Rs.2 a litre as crude oil prices dipped from an all-time high of $147 a barrel in July to under $45 a barrel.

Even after the price cut, public sector oil firms were making a profit of Rs 9.98 on sale of every litre of petrol and Rs 1.03 per litre on diesel. Further softening in global oil prices has seen these profits widen to Rs 11.48 a litre on petrol and Rs 2.92 a litre on diesel.

Among the oil and gas marketing companies, Indian Oil advanced 3 per cent, Hindustan Petroleum Corporation rose 4.2 per cent and Bharat Petroleum Corp climbed 3.64 per cent.

Crude oil headed for the second biggest weekly decline in more than five years as a deepening global recession saps demand, countering efforts by OPEC to boost prices. Oil has dropped 33 per cent this month even as OPEC agreed to its largest production cut in more than a decade because traders speculated that falling demand would outweigh the reduction.

At present, crude oil for January delivery was trading at $36.19 a barrel in international markets. Oil has fallen nearly 21 per cent this week.