ONGC, Oil India, other crude-sensitive stocks in focus as oil prices jump over 3% to around $70/bbl

Oil prices were on track for their strongest monthly gains in years on Friday, driven by rising tensions in the Middle East amid concerns that a potential US attack on Iran could disrupt supplies from one of OPEC’s largest producers, according to news reports.

In the morning trade, Brent crude futures slipped 21 cents to $70.50 a barrel, after climbing 3.4% in the previous session to settle at their highest level since July 31.

U.S. West Texas Intermediate (WTI) crude saw a 3.4% rise in the prior session that marked its highest close since September 26.

Both benchmarks, reports added, are poised to record their first monthly increase in six months. Brent is up more than 16% for the month, its largest monthly gain since January 2022, while WTI is set to rise over 14% in January, marking its biggest monthly advance since July 2023.

Tensions have escalated amid a US military buildup after President Donald Trump warned Iran to reach a nuclear deal or face possible military action, prompting a sharp response from Tehran.

Impact of fluctuation in oil prices on India on different sectors

As a net oil importer, India is generally disadvantaged by rising crude prices. Higher oil prices worsen the current account deficit (CAD), increase inflationary pressures, weaken the rupee, and can prompt tighter monetary policy. Falling oil prices have the opposite, economy-wide benefits.

Upstream (Oil & Gas Producers)

Companies such as ONGC and Oil India benefit directly from higher crude prices, as their realisations improve while production costs remain relatively stable. Rising oil prices boost revenues, cash flows, and profitability. Conversely, falling prices hurt earnings and can delay exploration and capital expenditure.

Downstream (Refiners & Marketing Companies)

Downstream players such as IOC, BPCL, and HPCL are sensitive to price volatility. Sharp rises in crude prices increase input costs and can compress refining and marketing margins, especially if fuel price hikes are not passed on immediately due to government intervention.

Aviation

Aviation turbine fuel (ATF), or jet fuel, is one of the largest cost components for airlines, accounting for 35–45% of operating expenses. Higher oil prices raise ATF costs, squeezing airline margins and potentially leading to fare hikes. Lower oil prices ease cost pressures and improve profitability.

Paints

Crude oil derivatives are key raw materials for the paints industry. Rising oil prices increase input costs, putting pressure on margins unless companies raise prices. Key paint players are Asian Paints, Kansai Nerolac, and Berger Paints.

Tyres

The tyre industry relies heavily on crude-linked inputs such as synthetic rubber, carbon black, and nylon tyre cord. Higher oil prices raise raw material costs, squeezing margins, especially when demand is weak. Lower oil prices reduce costs and support profitability.