Fuel prices may rise further in the coming days, says Bank of America after ₹3/litre hike

Brokerage firm Bank of America has said that more fuel price hikes are likely in the coming days following the recent ₹3 per litre increase in petrol and diesel prices.

According to the brokerage, the latest hike is significantly lower than the ₹5-10 per litre increase that many investors were anticipating. Bank of America noted that the current ₹3 per litre increase in petrol and diesel prices covers only around one-third of the existing transport fuel losses being incurred by oil marketing companies (OMCs).

The brokerage expects fuel price hikes to continue in a phased manner, either daily or weekly, especially if crude oil prices remain elevated. It is currently factoring in a 10-15% cumulative fuel price increase assuming crude oil prices average around $95 per barrel.

Crude oil prices have surged sharply in recent sessions, with Brent crude moving above the $103 per barrel mark amid heightened geopolitical tensions and supply concerns. Rising crude prices have increased pressure on domestic fuel retailers, prompting the recent upward revision in fuel prices.

Bank of America said the latest price hike could increase India’s consumer price inflation (CPI) by around 15 basis points over May and June. However, the brokerage maintained its FY27 headline CPI estimate at 5.2% year-on-year, indicating that the inflationary impact may remain manageable if price increases are phased out gradually.

The brokerage also highlighted that the recent price revision could lower the daily losses incurred by OMCs by nearly ₹110 crore.

Among oil marketing companies, Hindustan Petroleum Corporation Limited is expected to benefit the most from the fuel price hikes, followed by Bharat Petroleum Corporation Limited, according to the brokerage. Analysts believe higher fuel prices could help improve the long-term profitability outlook for OMCs by narrowing under-recoveries caused by elevated crude oil prices.

Shares of OMCs remained in focus after the brokerage commentary, with investors closely monitoring further developments in global crude markets and domestic fuel pricing trends.

Disclaimer: This article is for informational purposes only and should not be construed as investment advice.