Chennai Petroleum, MRPL shares surged up to 12%; here's why

Shares of Chennai Petroleum Corporation Ltd and Mangalore Refinery and Petrochemicals Ltd (MRPL) jumped up to 11 per cent in Monday's trade. Chennai Petroleum jumped 11.66 per cent to hit a day high of Rs 706.45, while MRPL's stock climbed 9 per cent to Rs 147.15. Both the counters logged heavy trading volumes along with the price action.

A rise in crude oil prices benefits refineries like Chennai Petroleum and MRPL, as it is expected to boost their gross refining margins (GRMs), according to Kranthi Bathini, Director of Equity Strategy at WealthMills Securities. High oil prices weighed on the profitability of oil marketing companies (OMCs) during the financial year 2024-25 (FY25).

GRM is the difference between the total value of petroleum products coming out of an oil refinery and the price of the raw material, which is crude oil.

Oil prices surged to their highest levels since January after the United States joined Israel in striking Iran's nuclear facilities over the weekend, intensifying fears of supply disruptions. Brent crude rose 72 cents, or 0.93 per cent, to $77.73 a barrel, while US West Texas Intermediate (WTI) crude climbed 71 cents, or 0.96 per cent, to $74.55.

The rally followed US President Donald Trump's announcement that Iran's key nuclear sites had been "obliterated" in coordinated strikes, escalating tensions in the Middle East. Iran, a key member of OPEC and the cartel's third-largest oil producer, vowed to retaliate.

Traders are bracing for further price increases amid concerns that any Iranian response could involve closing the Strait of Hormuz — a vital chokepoint for nearly 20 per cent of the world's crude oil shipments.

Meanwhile, higher crude oil prices weighed heavily on domestic benchmarks. Equity investors are expected to closely track oil price movements, which have been on an upward trajectory for the past three weeks. Focus will also remain on any potential retaliatory actions from Iran that could further roil the markets in the near term.