How Higher Crude Prices Affected India’s Equity, Commodity and Forex Markets Today

On Monday, Brent crude oil prices witnessed their biggest intra-day percentage gain since the start of the Gulf War in 1991 after an attack on Saudi Arabian oil facilities shut the equivalent of 5% of global supply. State energy producer Saudi Aramco lost about 5.7 million barrels per day of output on Saturday after 10 unmanned aerial vehicles struck the world’s biggest crude-processing facility in Abqaiq and the kingdom’s second-biggest oil field in Khurais.

Brent crude futures rose by as much as 19.5% to $71.95 per barrel, while WTI surged around 15% to $63.34 before paring gains to trade 10-12% higher later in the day.

Experts say the above event may act negatively for India which imports the majority of oil to meet its demand. Though the long-term impact is yet to be assessed, there was some immediate reaction seen in India’s equity, commodity and forex markets:

Equity markets: The benchmark S&P BSE Sensex was down as much 350 points, or nearly 1%, while the Nifty 50 index fell 107.70 points on fears of rising geopolitical tensions. However, the indices pared some losses later in the session.

Oil marketing companies: Shares of oil marketing companies (OMCs) showed steep decline in trade on Monday as higher crude prices translate into lower margins for these firms. Indian Oil Corp. Ltd (IOC) shares fell as much as 4.2%, Bharat Petroleum Corp. Ltd (BPCL) plunged 7.3%, while Hindustan Petroleum Corp. Ltd (HPCL) was down 7.7%.

Oil-producing companies: Meanwhile, shares of upstream companies like Oil and Natural Gas Corp. Ltd (ONGC) rose as much as 3.4%, while those of Oil India Ltd jumped 2.7% as increase in crude prices results in higher earnings for these firms.

Airline stocks: SpiceJet shares lost as much as 8% on Monday, while InterGlobe Aviation Ltd (IndiGo) lost 3.9% on fears that higher crude prices may push up air turbine fuel (ATF) cost for domestic airlines, thereby denting their profits.

Gold, silver: Gold prices jumped 1%internationally as an attack on Saudi Arabia’s oil facilities dented risk appetite, boosting demand for the safe-haven bullion. On MCX, October gold futures prices jumped 1.7% to Rs 38,163 per 10 grams, while silver prices shot up 3% to Rs 47,087 per kg.

Rupee:The rupee depreciated by as much as 75 paise, or 1.06%, to 71.67 against the US dollar on fears that higher crude oil prices will adversely impact India’s fiscal deficit situation.