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Oil marketing companies saw shares jump as Brent crude fell below $90, lowering their raw material costs. However, upstream producers like ONGC and Oil India slipped, facing lower revenue per barrel combined with a government royalty hike on onshore fields.
What Happened
On Friday, June 12, 2026, the Indian stock market reacted to a sharp decline in international oil prices. Brent crude futures dropped below the $90 per barrel mark, settling at $88.55. This decline was triggered by reports of diplomatic progress in the Middle East, which eased concerns regarding global oil supplies. As a result, the market saw a clear split in how different oil-related companies performed. Oil marketing companies (OMCs) saw their stock prices rise, while upstream producers involved in exploration and production faced pressure.
Why OMCs Benefited
For OMCs like Hindustan Petroleum Corporation Limited (HPCL), Bharat Petroleum Corporation Limited (BPCL), and Indian Oil Corporation Limited (IOCL), crude oil is the primary raw material. When global crude prices fall, the cost of procuring this raw material decreases. This lower input cost allows these companies to potentially improve their profit margins on refined products like petrol, diesel, and jet fuel. Investors responded positively, with HPCL shares rising 3.9%, BPCL climbing 3.8%, and IOCL advancing 2.8% by the end of the trading session.
The Upstream Revenue Struggle
In contrast, companies that explore and produce crude oil, such as Oil and Natural Gas Corporation (ONGC) and Oil India Limited (OIL), saw their stock values decline. ONGC shares fell 1.07%, while Oil India shares dropped 1.77%. These businesses sell the oil they extract at prices linked to global benchmarks. When the global price of crude falls, their revenue per barrel automatically decreases, putting immediate pressure on their profitability even if their production remains steady.
The Royalty Policy Impact
Upstream companies faced an additional financial challenge alongside the drop in oil prices. The government has reversed a previous royalty relief for crude oil produced from nominated onshore fields. The royalty rate has been increased back to 20% from a reduced rate of 12.5%. This change effectively increases the tax burden on these companies.
Industry analysis suggests this policy shift will hit Oil India harder than ONGC. Because Oil India relies almost entirely on onshore production, its profits are more exposed to this change. Estimates suggest this could impact Oil India’s profit before tax by 8-9%, whereas the impact on ONGC is expected to be lower, at around 2.5-3%, as a significant portion of its production is offshore.
What Investors Should Track
Investors may want to watch several key factors following this development. First, the volatility of global crude oil prices remains a primary driver for the performance of both sectors. A sustained drop is generally positive for OMCs but negative for upstream producers. Second, any further government announcements regarding royalty rates or fuel taxation policies will be important for upstream profitability. Finally, investors may keep an eye on how these companies manage their operating costs to offset the pressure from lower realizations and increased royalty payments.