Crude-Sensitive Stocks Fall as Brent Surges Above $81

resr 5paisa Research Team

Last Updated: 13th January 2025 - 04:13 pm

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Stocks of crude oil-dependent sectors, including oil marketing companies, airlines, as well as paint and tyre manufacturers, experienced a decline on January 13, following an increase in Brent crude prices.

Brent crude prices rose above $81 per barrel, reaching a three-month peak during early trading. The surge was fueled by expectations that the expanded U.S. sanctions on Russian oil producers and 183 vessels, announced on Friday, would significantly disrupt Russian crude exports to major buyers such as China and India.

As of 4:00 pm IST, January 13, the MCX crude oil price was at ₹6746.00 up 2.59% from its previous close.

Experts believe that this move, aimed at curbing Moscow’s oil revenue used to fund its war efforts in Ukraine, could severely impact Russian oil shipments to India and China. This may force the two major importers to seek alternative supplies from regions like the Middle East, Africa, and the Americas, potentially driving global oil prices higher.

This situation weighed heavily on the stocks of companies sensitive to crude price fluctuations, as rising crude prices increase their input costs, thereby pressuring profit margins. Consequently, shares of oil marketing giants Hindustan Petroleum Corporation, Indian Oil Corporation, and Bharat Petroleum Corporation fell by 1-6%, while airline stocks such as InterGlobe Aviation and SpiceJet declined by up to 4%.

Similarly, paint and tyre manufacturers saw their stock prices slip into negative territory. The decorative paint industry, which relies on over 300 petroleum-based raw materials, sees raw material costs accounting for 55-60% of total expenses, directly impacting profit margins.

In addition, Brent crude plays a critical role in the production of synthetic rubber and petrochemical-based components for tyre manufacturing. A rise in crude prices leads to increased production costs, further compressing profit margins for tyre companies.

As a result, shares of Asian Paints, Berger Paints, Shalimar Paints, Akzo Nobel, CEAT, Apollo Tyres, and Balkrishna Industries recorded declines of up to 3%.

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