Brent crude hits 3-year low; OMC, aviation, and paint stocks rally on cost relief

Indian markets saw a sharp rally in oil marketing companies (OMCs), aviation, and paint stocks after Brent crude prices dropped below $70 per barrel, marking a three-year low. The correction in crude prices comes as OPEC+ begins to ease production cuts, leading to expectations of lower fuel and raw material costs for these industries.

OMC stocks gain as input costs decline

OMCs, which depend on crude oil as their primary raw material, rallied as falling prices eased gross refining margin (GRM) pressures. Key gainers included:

• BPCL surged 3.2 per cent to Rs 264.10
• HPCL jumped 4.45 per cent to Rs 341
• IOC climbed 2.5 per cent to Rs 125.30

Since petrol, diesel, and LPG prices in India are regulated, OMCs face margin pressures when crude rises. Lower oil prices reduce input costs, improving profitability.

Aviation sector benefits from lower fuel prices

Aviation stocks also advanced as jet fuel (ATF) prices are directly linked to crude oil rates. With fuel accounting for 30-40% of airline operating costs, declining crude prices ease cost pressures. Key gainers in aviation included:

• IndiGo (InterGlobe Aviation): Up 1.7 per cent, hitting Rs 4,776.95
• SpiceJet: Gained 3.2 per cent to Rs 50

Paint companies gain as raw material costs ease

Paint manufacturers rely on crude-based derivatives like resins and solvents. A fall in oil prices leads to lower input costs, which can expand profit margins if companies maintain selling prices. Stocks that benefitted include:

• Berger Paints: Up 1.8 per cent
• Kansai Nerolac: Gained 3.2 per cent
• Asian Paints: Rose 2.2 per cent

OPEC+ production adjustments drive oil price movement

Brent crude’s decline below $70 per barrel is driven by OPEC+ gradually reversing voluntary production cuts, bringing back 2.2 million barrels per day over the next two years. Analysts expect continued volatility in oil prices as global supply and demand factors adjust.

Market outlook: Positive momentum for OMCs, airlines, and paints

With crude oil at multi-year lows, OMCs, airlines, and paint companies are set to benefit from cost savings and margin expansion. Investors are keenly watching further developments in global oil markets to gauge sustainability of these gains.