Paint, OMCs, and other oil-linked stocks in focus as crude prices slide 2%

Crude oil prices: Brent crude futures fell $1.12, or 1.7%, to settle at $66.37 a barrel. U.S. West Texas Intermediate (WTI) crude fell $1.30, or 2.0%, to settle at $62.37. Crude oil prices: Shares of crude oil-linked stocks, including paints, oil marketing companies (OMCs), tyres, and oil exploration companies, are expected to take centre stage on Friday, September 12, following the decline in crude oil prices in the international market on Thursday. Oil prices settled about 2% lower as concerns over possible softening of US demand and broad oversupply offset threats to output from the conflict in the Middle East and the war in Ukraine. Brent crude futures fell $1.12, or 1.7%, to settle at $66.37 a barrel. U.S. West Texas Intermediate (WTI) crude fell $1.30, or 2.0%, to settle at $62.37, said a Reuters report. The International Energy Agency stated in its monthly report that the world oil supply is expected to rise more rapidly than anticipated this year due to planned output increases by OPEC+, the Organisation of the Petroleum Exporting Countries, and its allies, including Russia. "Oil prices are falling today in response to bearish IEA headlines, which suggest massive oversupply on the oil market next year," Reuters reported, quoting Carsten Fritsch, an analyst at Commerzbank, as saying. On Sunday, OPEC+ agreed to raise production from October. But in another report, however, OPEC kept non-OPEC supply and demand forecasts for the year unchanged, citing steady demand. The market was torn between a perceived supply shortage due to a rise in tensions in the Middle East and Ukraine and actual oversupply from higher OPEC+ production and swelling stocks, said Tamas Varga, an analyst at PVM Oil Associates. OPEC leader Saudi Arabia's crude oil exports to China are set to surge, several trade sources told Reuters on Thursday, with state-controlled energy firm Aramco shipping about 1.65 million barrels per day in October, up sharply from 1.43 million bpd allocated in September. How does fluctuation in crude oil prices impact different sectors? A spike in crude oil prices put pressure on the margins of oil and gas marketers due to high input costs. State-run oil marketers are unable to increase retail prices in line with global prices, which impacts their profits and subsequently share prices. For the paint sector, crude oil derivatives account for around 25%-30% of the raw material cost of paint companies. A decline in crude oil prices eases the input cost and squeezes their margins. Tyre makers’ margins significantly depend on crude oil, as it is a source of synthetic rubber and other petrochemicals. A fall in crude prices decreases the raw material costs for tyre manufacturers. On the other hand, upstream companies take a hit when oil prices fall since the price at which they sell oil is determined by the market, but their costs of production are largely fixed. If it costs more to produce a barrel of oil than it would fetch on the market, producers will incur losses. ALSO READ | Tata Capital IPO likely to launch in early October 2025, aims to raise over ₹17,000 crore Major upstream companies in India's oil and gas sector include state-owned Oil and Natural Gas Corporation (ONGC) and Oil India Ltd. (OIL), alongside Reliance Industries Ltd. (RIL). To add Upstox News as your preferred source on Google, click here.