13 Jan , 2025 By : Debdeep Gupta
Crude-sensitive stocks like those of oil marketers, airlines, and paint and tyre manufacturers, which are dependent on crude as a key input material, took a hit on January 13 following a rise in Brent oil prices.
Brent crude prices surged past $81 per barrel, hitting a three-month high in early trade today. The rally was driven by expectations that expanded US sanctions on Russian oil producers and 183 vessels which were announced Friday, will disrupt Russian crude supplies to major importers China and India.
Analysts feel that the move, aimed to curb the revenue that Moscow uses to fund its war in Ukraine, will severely hurt Russian oil exports to India and China, pushing the two top buyers to source more oil from the Middle East, Africa and the Americas, thereby providing an upside risk to oil prices.
These developments dampened sentiment for crude-sensitive companies that stand to face margin pressure as an uptick in crude prices lifts their input costs. As a consequence, shares of oil marketers--Hindustan Petroleum Corp, Indian Oil Petroleum Corp, and Bharat Petroleum Corp tanked 1-6 percent while airlines InterGlobe Aviation and SpiceJet declined up to 4 percent.
Meanwhile, paint and tyre manufacturers have also slipped into the red. Crude oil prices significantly impact the decorative paint business, a raw material-intensive industry requiring over 300 items, mostly petroleum-based. Raw materials account for 55-60 per cent of input costs for paint manufacturers, directly affecting gross margins.
Likewise, Brent crude is also crucial for producing synthetic rubber and petrochemicals used in tyre manufacturing. A spike in crude prices lifts raw material costs, increasing production expenses and squeezing profit margins for tyre companies.
On that account, shares of Asian Paints, Berger Paints, Shalimar Paints, Akzo Nobel, CEAT, Apollo Tyres and Balkrishna Industries fell up to 3 percent.
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