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Crude oil at all time high; Upstream cos surge while downstream cos fall

Oil Marketing Companies stocks witnessed a fall as the government has asked them to absorb the pressure of rising crude oil prices and pass on a partial benefit to consumers of Rs1/litre. This may lead to a contraction in the marketing margins of OMCs like HPCL, BPCL and IOC.

Crude oil is trading all-time high at ~$70/bbl, which is positive for upstream companies like ONGC and Oil India. OPEC, Russia and other producers firm stance on production cut in 2018 has led to the recent surge in oil prices. Saudi Arabia wants to get oil prices near $80/bbl to support the valuation of state energy giant Aramco before an initial public offering, Bloomberg reported. This was supported by easing concerns over a prolonged trade spat between the United States and China after China’s President Xi Jinping showed signs of promising to open up China’s economy and lower import tariffs on cars.

However, US is increasing export of crude oil, with low signs of slowing down, which is balancing out the surge in price to some extent.