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  5. Asian Paints, MRF, JK Tyre, IOCL: Oil-linked stocks in focus as Brent crude surpasses $80/barrel

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Asian Paints, MRF, JK Tyre, IOCL: Oil-linked stocks in focus as Brent crude surpasses $80/barrel

Upstox
By Upstox News Desk

2 min read | Updated on October 08, 2024, 09:59 IST

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SUMMARY

Crude oil is one of the key raw materials for the tyre and paint companies. Crude oil derivatives make up 55–60% of the raw materials used in the production of paint. Similarly, tyre industry relies heavily on oil-derived products such as synthetic rubber.

Stock list

ASIANPAINT
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INDIGOPNTS
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KANSAINER
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IOC
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Brent crude futures on Tuesday morning fell 23 cents, or 0.3%, to $80.70 per barrel by 0029 GMT.

Brent crude futures on Tuesday morning fell 23 cents, or 0.3%, to $80.70 per barrel by 0029 GMT.

Brent crude oil: Shares of companies sensitive to oil prices, such as paint, tyre, oil marketing companies, as well as oil and gas exploration, will be in focus on Tuesday, October 8, as crude oil prices soared in the international market with Brent crude futures surpassing $80 per barrel for the first time since August.

The prices jumped as the increased risk of a region-wide Middle East war unnerved investors. 

However, the prices edged lower on Tuesday morning. 

Fighting in the Middle East intensified after Iran-backed Hezbollah fired rockets at Israel's third-largest city, Haifa, and Israel looked poised to expand its offensive into Lebanon, a year after the Hamas attack on Israel that sparked Israel's ongoing war in Gaza.

Brent crude futures on Tuesday morning fell 23 cents, or 0.3%, to $80.70 per barrel by 0029 GMT. US West Texas Intermediate futures fell 20 cents, or 0.3%, to $76.94 a barrel, Reuters reported. 

Some analysts believe that an attack on Iranian oil infrastructure is unlikely and have warned that oil prices could face considerable downward pressure if Israel focuses on any other target.

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Even if an attack targets Iranian oil facilities, there is 7 million barrels per day of spare supply capacity within the Organization of Petroleum Exporting Countries (OPEC) to make up for the loss of its oil output, Reuters reported, quoting ANZ Bank analysts. 

Crude oil is one of the key raw materials for the tyre and paint companies. Crude oil derivatives make up 55–60% of the raw materials used in the production of paint. Similarly, tyre industry relies heavily on oil-derived products such as synthetic rubber. Hence, an increase in crude oil means the production is expensive, leading to impacting the profit margins of these companies. 

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Oil marketing companies such as BPCL, HPCL, and IOCL are also expected to take a hit. However, upstream companies such as ONGC and Oil India are expected to gain from the rise in oil prices as their efforts to extract oil remain the same, but margins improve a lot.

About The Author

Upstox
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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