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Crude Oil- A Commodity That Moves the Market

Commodities often affect the


companies and the markets. But
what moves the market most is
Crude Oil. It is a trend setter.
However, it is very uncertain how
markets, especially Indian Market
will take the change in the prices of
the Crude.

Oil prices are decided by the


supply and demand for petroleum-based products. During an economic expansion, prices
might rise as a result of augmented consumption; they might also decline as a result of
increased production.

Stock prices rise and fall depending on future corporate earnings reports, fundamental values,
investor risk tolerances and a large number of other factors. Even though stock prices are
commonly combined and lumped together, it is very possible that oil prices affect certain
sectors much more radically than others. In other words, the economy is too intricate to
expect one commodity to drive all business activity in an expected way.

Crude and Transportation:


Transportation is one sector that is strongly correlated with the spot price of Oil because the
dominant input cost for transportation firms is fuel. Investors might want to consider shorting
the stocks of corporate transportation companies when oil prices are high. Conversely, it
makes sense to buy when oil prices are low.

Date

Crude Oil VRL Logistics

TCI

AllCargo

Aegis

Snowman
Logistics

16-Dec
15-Dec
14-Dec
13-Dec
12-Dec
9-Dec
8-Dec
7-Dec
6-Dec
5-Dec
2-Dec
1-Dec
30-Nov
29-Nov

51.9

266.4

163.9

171.1

142

51.7

50.9

265.85

169.4

171.65

141.65

52.7

51.04

265.5

175.1

164.9

139.05

52.45

52.98

267.85

179.7

165.85

141.4

52.45

52.83

266.45

170.95

164.3

145.5

53.2

51.5

267.8

170.1

166.7

150.4

52.75

50.84

265.9

170

168.3

146.5

50.55

47.99

264.15

170.3

166.3

144.3

50

50.93

263.85

170.85

164.55

143.85

50.65

51.79

265.25

172.85

163.75

144.75

51.3

51.68

264.15

169.7

171.1

142.5

51.65

51.06

273.9

173.3

173.85

149.45

52.8

49.44

275

175.1

177.6

149.15

53.6

45.23

269.2

176.6

172.3

144.75

52.15

The table depicts that rise and fall in the Crude oil prices has more or less have affected most
transport and logistics companies. On 16th December when the crude went green, TCI share
price took a massive fall. Even Snowman Logistics share price declined. On 15th December,
when the price of Crude had slipped from its earlier price, VRL Logistics share price gained,
and so did Aegis share price, Allcargo share price and shares of Snowman Logistics.
However, on 2nd December, it is easy to notice that a massive gain in two trading sessions
lead to the decline of each transportation stocks. All these stocks are top 500
recommendations by the Dynamic Levels for the quarter, apart from Aegis which is a
Multibagger Stock pick.

Since, even the shares of transportation and logistics companies do not trade alone on the
price of Crude. Rather there are many factors that drive the prices of these stocks. Hence,
impact of crude is often visible on most of the stocks, yet it is not that prominent and regular.

Crude worries Consumers:


On November 30th the Organization of the Petroleum Exporting Countries (OPEC, for the
first time in eight years, decided to cut their oil production levels by 1.2 million barrels per
day in order to raise global oil prices. OPEC, an association of 13 major oil exporters,
currently produces 33.7 million barrels of oil per day (bpd). As part of the deal, they decline
production down to 32.5 million bpd, with Saudi Arabia, Iraq, UAE, and Kuwait making the
biggest cuts.
Since the announcement, oil prices have risen from $46 per barrel up to $53.77 per barrel as
at the first week of December. The odds of rising crude oil prices are lofty but while that
would be appreciated by oil producers, consumers might not be that thrilled as higher crude
price mean potential increase in petrol pump price. The general predisposition is that when
oil price falls, consumers are happy while producers are unhappy.
As per the US Energy Information Agency (EIA) crude oil prices make up 71 per cent of the
price of petrol. The rest of what consumers pay at the pump depends on refinery, distribution
costs and other related costs which usually remain stable. Analysts, therefore, foresee a surge
in petrol prices following the agreement by oil producers to slash global output which has
seen crude price surging high.
Already the price of petrol in some consumer countries is close to rising. In India, authorities
have notified consumers that they may soon have to cough up more, though the fuel price
hike may happen in installments according to the reports of media. The government might
require raising petrol and diesel prices by up to 6 Rupees a liter when they review fuel prices
mid-December.
Although, Crude Oil does not directly impacts the market as a whole, but there is no denying
the fact that it is a major driver in the market. Any share rise or fall in its prices affects the
stocks one way or the other. It might not be wrong to say that this commodity is an important
market mover.

Disclaimer
The investment advice or guidance provided by way of recommendations, reports or other ways are solely the personal views of the research
team. Users are advised to use the data for the purpose of information and rely on their own judgment while making investment decision.
Dynamic Equities Pvt. Ltd - SEBI Investment Advisory Reg. No.: INA300002022

Disclosure
Dynamic Equities Pvt. Ltd. is a member of NSE, BSE, MCX SX and a DP with NSDL & CDSL. It is also engaged in Investment Advisory
Services and Portfolio Management Services. Dynamic Commodities Pvt. Ltd., associate company, is a member of MCX & NCDEX. We declare
that our activities were neither suspended nor we have defaulted with any stock exchange authority with whom we are registered. SEBI,
Exchanges and Depositories have conducted the routine inspection and based on their observations have issued advise letters or levied minor
penalty on for certain operational deviations.
Answers to the Best of our knowledge and belief of Dynamic/ its Associates/ Research Analyst: DYNAMIC/its Associates/ Research Analyst/
his Relative:

Do not have any financial interest / any actual/beneficial ownership in the subject company.
Do not have any other material conflict of interest at the time of publication of the research report
Have not received any compensation from the subject company in the past twelve months
Have not managed or co-managed public offering of securities for the subject company.
Have not received any compensation for brokerage services or any products / services or any compensation or other benefits from the
subject company, nor engaged in market making activity for the subject company
Have not served as an officer, director or employee of the subject company

Article Written by
Tanaya Nath