CLSA Warns Crude Oil Prices Could Rise Over Next Three to Four Months; Here Are the Stocks That Could Be Impacted
Key Takeaways
- •CLSA expects crude oil prices to rise over the next three to four months.
- •Higher crude prices benefit upstream producers like ONGC and Oil India through improved realizations.
- •Refining and marketing companies such as IOC, HPCL and BPCL face margin pressure as higher crude raises their raw material costs.
- •Paint, tyre and FMCG companies risk elevated input costs from crude derivatives, depending on their ability to pass them on to consumers.
- •India imports about 85 percent of its crude needs, and sustained higher prices could widen its trade and current account deficit and fuel inflation.
CLSA has warned that crude oil prices are likely to rise over the next three to four months, a development that would have divergent effects across India's oil and gas sector as well as on paint, tyre and FMCG companies that use crude-derived inputs.
According to the brokerage, an increase in crude oil prices is generally positive for upstream oil producers such as Oil and Natural Gas Corporation (ONGC) and Oil India, whose realizations improve when global benchmark prices climb. In contrast, higher crude prices are negative for downstream refining and marketing companies such as Indian Oil Corporation (IOC), Hindustan Petroleum Corporation (HPCL) and Bharat Petroleum Corporation (BPCL), which buy crude as a raw material and face pressure on refining margins when input costs rise.
Beyond the oil sector, elevated crude prices also tend to raise input costs for industries dependent on crude derivatives, including paints, tyres and fast-moving consumer goods (FMCG), where crude-based inputs such as petrochemical feedstocks and carbon black are significant cost components. For these consumer-facing industries, the impact on margins often depends on their ability to pass on higher input costs through price increases — a factor markets typically watch when crude sustains at elevated levels.
India imports the bulk of its crude oil requirements — roughly 85 percent of its oil needs, according to figures cited by the government — making the country sensitive to swings in global prices. Sustained higher crude prices can also widen India's trade and current account deficit and feed into domestic inflation, which is why brokerage views on the crude trajectory draw wide attention from equity market participants tracking rate-sensitive and oil-linked sectors.
The market context for the warning includes heightened tensions in West Asia, where conflict between the United States and Iran and concerns around the Strait of Hormuz — a key chokepoint through which a large share of the world's seaborne oil passes — have raised supply risk in the global market. Supply decisions by the OPEC+ grouping of producers, which has managed output levels in recent years through successive quota adjustments, remain another variable investors monitor alongside geopolitical developments when assessing the direction of crude prices.
The original report is available at CNBC-TV18.
