Asian Paints, IOC shares rise as larger-than-expected OPEC+ oil output hike lowers raw material cost

Oil prices tumble after OPEC+ announces larger-than-expected hike in output for August

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Shares of oil marketing companies (OMC) and paint manufacturers posted gains after the price of crude oil, a key raw material, fell on July 7 as OPEC+ announced a larger-than-expected increase in oil production for August.

The Organization of the Petroleum Exporting Countries and their allies, also known as OPEC+, announced over the weekend its plan to hike production by 5.48 lakh barrels per day (bpd) in August, which is significantly higher than the 4.11 lakh bpd monthly increase in output approved by the organization for May, June and July.

After the announcement, oil prices tumbled, with Brent crude futures down 0.73 percent to $67.80 per barrel, while US West Texas Intermediate crude dropped 0.72 percent to hover around $66.02 per barrel, as of 10 am.

OPEC+ said the sharp rise in output was driven by 'steady global economic outlook and current healthy market fundamentals'. Goldman Sachs analysts now expect OPEC+ to announce a bigger and final 5.5 lakh bpd increase for September at its next meeting scheduled for August 3.

The sharp fall in oil prices will likely benefit margins of companies that rely on crude as raw material. Indian Oil Corporation (IOC) shares gained over a percent, while Hindustan Petroleum (HPCL) shares too gained nearly a percent in early trade. Shares of index heavyweight Reliance Industries were up half a percent at Rs 1,535 apiece. Bharat Petroleum (BPCL) shares however bucked the trend to trade in the red.

Asian Paints shares gained over a percent, while Indigo Paints were hovering in the green with marginal gains.

The rise in the paint and OMC stocks comes amid a muted market sentiment, with benchmark indices Sensex and Nifty trading with caution.

(With inputs from Reuters)

Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.