Shares of paint and tyre stocks saw an upswing on September 11 after crude oil prices hit their lowest point in nearly three years. Lower raw material costs mean bigger profit margins for these businesses.
Around midday, shares of paint companies such as Indigo Paints, Shalimar Paints, Kansai Nerolac, Asian Paints, and Berger Paints rose between 1 and 2.6 percent. Similarly, tyre companies like JK Tyre, Balkrishna Industries, MRF, Apollo Tyres, and Ceat saw gains ranging from 0.3 to 1.8 percent.
Oil marketing companies (OMCs), including HPCL, BPCL, and IOCL, which had initially been trading positively, gave in to profit booking, with shares slipping by nearly 2 percent. Falling oil prices would mean that these companies can restock at cheaper rates, boosting their profit margins.
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Brent crude futures fell 4 percent and settled at $69.2 a barrel, its lowest since December 2021. Meanwhile, US West Texas Intermediate (WTI) crude fell over 4 percent and settled at $65.8 a barrel, a level unseen since May 2023. This drop follows the Organisation of Petroleum Exporting Countries' (OPEC) reduced forecast for global oil demand for this year and 2025.
On September 10, the OPEC, in a monthly report said world oil demand would rise by 2.03 million barrels per day (bpd) in 2024, down from last month's forecast for growth of 2.1 million bpd. OPEC also cut its 2025 global demand growth estimate to 1.7 million bpd from 1.8 million bpd. Prices slid on the weakening global demand prospects and expectations of oil oversupply.
The market is particularly worried about China, the world's largest importer of oil. While Chinese exports surged in August, hitting their fastest growth rate in nearly a year and a half, the country's imports fell short.
However, the drop in crude prices isn't all good news. Oil drilling stocks like ONGC, Oil India, and Hindustan Oil Exploration Company are struggling. The lower crude prices mean squeezed profit margins for these companies, and refineries holding inventory bought at higher prices might face losses. As a result, shares of these upstream companies fell 2-5 percent.
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