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  5. Asian Paints, Indigo Paints, CEAT: Paint, tyre stocks gain as oil prices slide; Oil India tanks 6%

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Asian Paints, Indigo Paints, CEAT: Paint, tyre stocks gain as oil prices slide; Oil India tanks 6%

Upstox
By Upstox News Desk

2 min read | Updated on September 11, 2024, 10:21 IST

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SUMMARY

The crude oil prices hovered around three-year lows on concerns over a weak demand outlook. Both Brent and WTI fell nearly $3 on Tuesday, with Brent hitting its lowest level since December 2021 and WTI falling to a May 2023 trough after OPEC+ revised down its demand forecast for this year and 2025.

Stock list

ASIANPAINT
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KANSAINER
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OIL
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A fall in oil prices is negative for upstream companies

A fall in oil prices is negative for upstream companies

Paint and tyre stocks were trading with gains on Wednesday, September 11, owing to a sharp slide in crude oil prices. 

The crude oil prices hovered around three-year lows on concerns over a weak demand outlook. 

Both Brent and WTI fell nearly $3 on Tuesday, with Brent hitting its lowest level since December 2021 and WTI falling to a May 2023 trough after OPEC+ revised down its demand forecast for this year and 2025.

A fall in crude oil prices is positive for paint and tyre companies, as crude oil derivatives are one of the key raw materials for them. Hence, a drop in the prices of raw materials will be positive for the companies' profitability. 

Oil marketing companies (OMCs), too, gain from the slide in oil prices as fall in price boosts the profit margins for firms. 

Here is how the stocks were performing
Paint stocks: Asian Paints was trading nearly 1% higher at ₹3,321.10 apiece on the BSE while Kansai Nerolac was up over 2% at ₹315.05. Indigo Paints was trading over 1% higher at ₹1,518.90. 
Tyre stocks: JK Tyre was trading 0.7% higher at ₹428.90 on the BSE while MRF was ruling at ₹1,35,942.35, up 0.17% on the BSE. CEAT shares were up 1.28% at ₹2,880. 
Oil marketing companies: At the time of writing this article, IOCL, BPCL, and HPCL were trading in the red. 
Oil upstream companies: ONGC was trading over 2% lower at ₹289.25 on the BSE while Oil India slid over 6% to ₹572.20 on the BSE. 
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A fall in oil prices is negative for upstream companies, as 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 and eventually go under", explains Investopedia. 

On Monday, Morgan Stanley cut its Brent crude oil forecasts for coming quarters and said the global oil market is facing a period of demand weakness similar to those seen during recessions.

"Rising fuel inventories, lower refining margins and the spreads between the price now and the price in the future all echo previous recessionary periods or other moments of weak demand," Reuters reported, quoting Morgan Stanley as saying.

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Upstox News Desk is a team of journalists who passionately cover stock markets, economy, commodities, latest business trends, and personal finance.

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