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business/news//Moneycontrol
Shares of crude-sensitive companies surged in early trade on Monday after global oil prices tumbled below the $100-per-barrel mark.
Brent crude futures fell below $100 a barrel, reaching their lowest level in over two weeks.
KEY POINTS
The oil price drop was attributed to progress in U.S.-Iran negotiations possibly reopening the Strait of Hormuz.
Shares of Indian oil marketing companies like HPCL and BPCL surged over 4 percent on lower crude prices.
Tyre and paint stocks rose sharply, benefiting from reduced raw material costs linked to cheaper crude oil.
Lower crude prices are easing inventory and capital pressures for oil marketing companies, improving their margins.
Shares of crude-sensitive companies surged in early trade on Monday after global oil prices tumbled below the $100-per-barrel mark, boosting sentiment for sectors that benefit from lower fuel and raw material costs. HPCL climbed over 4.5 percent, BPCL gained nearly 4 percent and IOC rose more than 3 percent, while tyre maker JK Tyre advanced 4.5 percent as investors cheered the sharp correction in crude prices.
The rally followed a steep overnight decline in oil prices, with Brent crude futures dropping below $100 a barrel to their lowest level in more than two weeks. This was due to growing optimism that the United States and Iran could move closer to an agreement to reopen the Strait of Hormuz and restore normal oil flows from the Gulf region.
Among oil marketing companies, Hindustan Petroleum Corporation rose 4.5 percent to Rs 407.25, Bharat Petroleum Corporation gained 3.7 percent to Rs 306.45 and Indian Oil Corporation advanced 3.3 percent to Rs 144. Tyre stocks also attracted strong buying interest, with JK Tyre jumping 4.5 percent, CEAT gaining 2.3 percent and Apollo Tyres rising nearly 2 percent.
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The gains extended to other sectors that are highly sensitive to crude prices. InterGlobe Aviation, the parent of IndiGo, climbed 1.6 percent, while paint makers Asian Paints and Berger Paints rose about 1 percent each. Kansai Nerolac Paints also traded in positive territory.
Brent crude futures fell 4.6 percent to $98.83 per barrel in early Asian trade, while U.S. WTI crude dropped nearly 5 percent to around $92 a barrel. The decline came after reports suggested progress in U.S.-Iran negotiations, raising hopes that supply disruptions from the Middle East could ease in the coming weeks.
Lower crude prices are typically positive for oil marketing companies as they reduce inventory and working capital pressures while improving marketing margins. Tyre manufacturers and paint companies benefit from softer raw material costs because many of their inputs are derived from crude oil. Airlines also gain from the prospect of lower aviation turbine fuel costs, one of their largest operating expenses.
The strength in crude-sensitive stocks added to the broader market rally. At around 9:20 am, the Sensex was up more than 835 points and the Nifty had gained over 1 percent, supported by easing oil prices, improving global sentiment and broad-based buying across sectors.