Shares of oil and gas companies, including Indian Oil Corporation (IOC), Hindustan Petroleum Corporation (HPCL), Bharat Petroleum Corporation (BPCL), and GAIL, surged as much as 4 percent in intraday trade. Stocks like Petronet LNG, Indraprastha Gas, and Reliance Industries also surged over 4 percent during the trading session. Experts believe lower crude oil prices can reduce input costs for some downstream companies and support their refining, marketing and gas-related businesses. and this at least for today has boosted investor sentiment towards these stocks.
However, shares of upstream exploration and production companies, such as ONGC and Oil India, declined as much as 4 percent. These firms are involved in oil and gas exploration and production, so lower crude oil prices can reduce the revenue they earn from selling crude oil and may put pressure on their profitability. Hence, upstream and downstream stocks react differently to fluctuation in crude oil prices.
While Brent Crude prices were trading below 103 dollars per barrel (at the time of filing this copy). However, analysts are eyeing US President Donald Trump’s denial on easing sanctions on Iran even as Qatar pushed for peace talks has already resulted in a marginal uptick in crude oil prices. Brent Crude prices are headed for a monthly gain of around 14 percent, the biggest surge since July, while WTI is on track for a 4% spike after having breached 106 dollars per barrel for the first time since May.
Mitali Nikore, Economist and Founder, Nikore Associates told Times Now Digital, “India is being squeezed from both sides—higher oil prices and a weaker currency. With nearly 90% of crude imported, every dollar added to oil prices raises the rupee cost of energy, transport and imported goods. For consumers, that means pressure on fuel, food, travel and everyday household expenses, while higher input costs can squeeze incomes and savings. If the war-driven shock persists, this stops being a currency story and becomes an inflation, consumption and growth story.”