Rising Oil Prices Drag Crude-Sensitive Stocks Lower; OMCs Lead Decline

Shares of crude-sensitive companies such as Bharat Petroleum Corporation Ltd (BPCL), Indian Oil Corporation Ltd (IOCL), Hindustan Petroleum Corporation Ltd (HPCL), InterGlobe Aviation and Eternal ended lower on May 18 as rising global crude oil prices and escalating tensions in West Asia weighed on investor sentiment.

The selloff came after Brent crude oil prices crossed the $111-per-barrel mark following reports of a drone strike on the Barakah nuclear power plant in the United Arab Emirates (UAE), raising concerns over possible supply disruptions in the region.

Oil Marketing Companies Under Pressure

Oil marketing companies (OMCs) were among the worst hit during the session as investors worried that elevated crude prices could squeeze refining and marketing margins.

Shares of OMCs BPCL, IOCL and HPCL, which refine crude oil into fuels and sell them to consumers, fell 1-2 per cent.

The stocks remained under pressure despite the recent Rs 3 per litre hike in petrol and diesel prices, as investors fear companies may not be able to fully pass on higher crude oil costs to consumers if prices remain high for long.

Aviation, City Gas, Consumer Stocks Fall

Airline stocks also came under pressure as higher crude oil prices increase aviation fuel costs, a key expense for carriers. InterGlobe Aviation, which operates IndiGo airlines, fell nearly 1 per cent, while SpiceJet plunged by more than 3 per cent as investors worried about rising fuel costs and weakness in rupee hurting profitability.

Consumer-facing companies related to petroleum-based raw materials also remained weak. Eternal, the parent company of Zomato, fell up to 3 per cent before recovering to end marginally lower, amid concerns that higher LPG prices and supply chain disruptions could raise costs for restaurants and food delivery businesses. Swiggy, Eternal's competitor, also closed in red.

City gas distribution companies also ended lower, with Adani Total Gas falling around 1 per cent, Mahanagar Gas declining 3.18 per cent, and GAIL slipping 0.70 per cent.

Why Crude Oil Prices Rose Today

Crude oil prices surged as tensions in West Asia escalated, making investors worried about possible disruptions in global crude supplies.

The trigger came after a drone attack on the Barakah nuclear power plant in the United Arab Emirates (UAE). Saudi Arabia also reportedly intercepted drones entering from Iraqi airspace, raising fears that the conflict could spread further across the region.

At the same time, US President Donald Trump increased pressure on Iran to speed up negotiations.

“For Iran, the Clock is Ticking, and they better get moving, FAST, or there won’t be anything left of them. TIME IS OF THE ESSENCE!” Trump wrote on Truth Social.

These developments increased concerns over the security of the Strait of Hormuz, one of the world’s most important oil shipping routes. As a result, Brent crude prices jumped nearly 2 per cent to trade above $111 per barrel, while US West Texas Intermediate (WTI) crude also rose to trade above $102 a barrel.

India imports more than 85 per cent of its crude oil requirements, making the economy highly sensitive to volatility in global energy prices.

Higher crude oil prices increase inflationary pressures, widen the current account deficit and weaken the rupee. They also raise input costs for sectors such as oil marketing, aviation, paints, chemicals and logistics.

Frequently Asked Questions

Q1. Why did crude-sensitive stocks fall on May 18?
Crude-sensitive stocks declined after Brent crude oil prices crossed $111 per barrel amid escalating tensions in West Asia and fears of supply disruptions.

Q2. Which sectors were most affected by rising crude oil prices?
Oil marketing companies, airlines, city gas distributors and consumer-facing businesses linked to petroleum-based raw materials were among the worst hit.

Q3. Why are higher crude oil prices a concern for India?
India imports over 85 per cent of its crude oil needs, so higher oil prices can increase inflation, widen the current account deficit and raise costs for several sectors.