BPCL, HPCL and Tyre Stocks Fall as Crude Nears $100; ONGC, Oil India Gain

The sharp rise in crude oil prices split the Indian market into clear winners and losers on Tuesday, September 8. Stocks that count oil and its derivatives among their major costs came under selling pressure, while upstream producers moved higher as Brent approached the $100-a-barrel mark. 

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Oil marketing companies felt the heat right away. BPCL dropped by 2.88% to ₹303.90, while HPCL fell by 2.42% to ₹348.25. Indian Oil Corporation saw a decline of 0.92% to ₹133.90.

This was after Brent crude shot up by over 2% to about $99 per barrel. The price peaked at $99.22 during the day’s trading session – its highest level since July 24. West Texas Intermediate (WTI) crude shot up by more than 3% to about $94.4 per barrel.

Middle East Tensions Send Oil Prices Higher 

The most recent rally in oil prices follows yet another development in the Middle East. Yemeni rebels backed by Iran attacked energy assets in Saudi Arabia, shutting down certain operations. In addition, Iran warned the US of “economic warfare” against America. This is amid worries that there may be disruption to energy production and sea transport in the Middle East. 

For Indian companies whose costs are closely linked to crude, the rise quickly showed up in their share prices. 

Tyre makers traded lower through the session. Apollo Tyres fell 2.20% to ₹411.55, while JK Tyre & Industries lost 1.07% to ₹364.50. CEAT was down 0.83% at ₹3,308.40. 

Crude and its derivatives form an important part of the raw-material basket for tyre manufacturers. A prolonged increase in oil prices can therefore raise their input costs, particularly if the higher expenses cannot be passed on through product prices. 

Paint stocks too experienced some gains as well. The stock of Berger Paints India moved down by 0.80% to ₹480.60, that of Kansai Nerolac Paints moved down by 0.44% to ₹193.42 and Asian Paints fell 0.26% to ₹2,494.30. 

Stocks of airlines fared relatively better although the price of crude oil was on the higher side. The stock of InterGlobe Aviation, which is an operator of IndiGo, gained marginally to ₹5,001.50, while SpiceJet remained flat at ₹9.59. 

ONGC and Oil India Move the Other Way 

For oil producers, the market reaction was almost the reverse. 

Oil India climbed 2.02% to ₹496.85, while ONGC gained 1.19% to ₹236.47. Higher crude prices can support realisations for upstream producers, putting these stocks on the other side of Tuesday’s oil-driven market moves. 

The overall market itself is witnessing tough trading conditions. As of 2:51 pm, the Sensex was down 535 points or 0.70% to 75,597. The Nifty 50 was 137 points or 0.58% lower at 23,642, and the Nifty Oil & Gas index had lost 0.76%. 

Tuesday’s trading saw how quickly a move in oil translates to other areas of the market. Oil marketing companies, tyre and paint stocks faced selling as Brent moved towards $100, while ONGC and Oil India benefited from the same rise in crude prices.