Crude Oil at $83/bbl – Who Gains and Who Loses

5paisa Research Team 5paisa Research Team 13th December 2022 - 03:36 pm

The price of Brent crude has rallied to above $83/bbl and is now at the highest level that oil has since in last 2014. In short, oil is at the highest level in the last 7 years. What is it that has contributed to this sharp rally in oil prices? It is a mix of demand surge and supply constraints that is pushing oil prices higher.

On the demand side, there has been a surge in oil demand in line with the opening up of economies post pandemic and also as industrial capacities get back to normal. On the supply side, OPEC has confirmed in its latest meet that the cartel would only be raising the supply gradually. US supplies are also constrained by the hurricane in Gulf of Mexico.

The sustained drawdowns in the US inventory in the last few weeks indicate that demand continues to far exceed supply. At a macro level, that has negative repercussions for the Indian trade deficit and the value of the rupee. More importantly, higher crude prices means higher inflation since India relies on imports for 80% of its daily crude needs.

Who gains and who loses from the oil prices spike?

The table below captures some of the key gainers from the spike in oil prices:

Company	Gainer / Loser	Reason
ONGC Ltd and Oil India	Gainer	Higher crude prices improves their realization per barrel and boosts profits. Has a positive impact on gas prices also
IOC Ltd	Gainer	IOCL gains from better gross refining margins (GRM) and higher inventory translation gains on higher crude prices
GAIL Ltd	Gainer	A major beneficiary of higher gas prices since the price of gas is indirectly pegged to crude prices

The table below captures some of the Key Losers from the spike in oil prices:

Company	Gainer / Loser	Reason
Asian Paints and Berger	Loser	Paint companies passed on most of their cost spikes to end users but that may not be possible beyond a point. Crude is a key input.
MGL, IGL, Gujarat Gas	Loser	City gas distributors or CGD players will be up against higher input costs that are likely to squeeze margins
Fertilizer Plants	Loser	The gas fired fertilizer plants are likely to see a negative impact of the oil price hike as higher gas prices will be a negative