How rising crude prices may affect these 10 oil-related stocks


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Sectors which are likely to see increasing pressure thanks to a rise in crude oil prices are upstream oil companies.


Global crude oil prices inched upward to hit its highest level ($80 per barrel) since November 2014 on the back of geopolitical fears over potential supply disruption after US withdrew from the Iran nuclear deal as well as supply shocks in Venezuela, Mexico and Libya.

But why is crude so important for India? India is a net importer of crude oil and imports nearly 80 percent of its oil requirement. A meaningful rise in Brent prices will strain India’s fiscal/current account deficit, trigger inflation concerns for the Reserve Bank of India (RBI) and also dent hopes of a credit rating upgrade for India.

“India imports 3 million barrels per day (net) of crude oil, resulting in a sensitivity of $11 billion: 40 basis points impact on GDP for every $10/bbl move in oil,” Sumit Pokharna, Deputy Vice-President Research at Kotak Securities, said. He added that higher crude oil price will increase raw material cost, working capital requirements and operating cost for user industries such as lubricants, chemicals (including consumer staples) and paints.

Sectors which are likely to see increasing pressure thanks to a rise in crude oil prices are upstream oil companies. However, the same will be positive for export-oriented sectors such IT and pharma as rise in crude will put pressure on the currency as well. Bhupendra Tiwary of ICICI Securities see sectors like airlines, paints, tyres, plastics and select fast moving consumer goods (FMCG) companies which use crude and its derivatives as their input being impacted the most.

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