Crude oil to sustain below $60 a barrel? Stocks & sectors to watch

Crude oil prices have crashed in the last few days with crude barely moving above $60 a barrel on Tuesday. Crude oil prices had settled at their lowest since February 2021 on Monday. This tends to be supportive for major oil importing countries like India, which not only benefit from lower dollar outflow, but also select oil-dependent sectors getting some aid from falling crude prices.

Crude oil prices have come under pressure due to two primary factors, said Abhishek Jain, Head of Research at Arihant Capital Markets. First, there are growing concerns about a slowdown in global industrial activity, particularly following the escalation of tariff-related tensions. Second, OPEC’s recent decision to increase production by 4 lakh barrels in June," he said.

Echoing the similar notion, Prashanth Tapse, Senior VP (Research), Mehta Equities said that weak global demand along with slowing down of major economies like US and China is putting pressure on crude oil prices.

Crude prices cannot sustain at these levels for long term as oil countries like Saudi Arabia and Russia will take measures to curb the supply. Besides that, geopolitical factors will also subside, which will push the crude oil price towards $75-80 per barrel, he said.

However, Jain from Arihant Capital has another view. "The $55–$60 range appears to be a strong support zone for crude oil in the near term. While prices may remain around this level in the absence of a full-blown recession, any further signs of global economic weakness could exert additional pressure. Crude is expected to hover near current levels in the medium term," he said.

Falling crude oil prices typically benefit sectors that are heavy consumers of petroleum-based inputs. Oil marketing companies (OMCs) could see margin improvements due to lower input costs, said Jain. "Overall, industries directly or indirectly tied to crude—like paints, aviation, and chemicals—stand to gain if the trend sustains," he said.

Swarnendu Bhushan, Co-Head of Institutional Equities at PL Capital believes Brent will bounce back to $70 per barrel soon as sanctions against Venezuela and Iran tighten. "Additionally, the marginal cost of production is also $70/bbl. Continued supply hike from OPEC+ remains a risk though," he said.

According to Tapse from Mehta Equities sectors including paints, aviation, logistics and supply chain counter will be major beneficiaries of falling crude oil prices. He also mentioned that if the benefits of falling crude oil are passed on to consumers, it may benefit FMCG and consumer discretionary sectors as well.

OPEC+ supply to increase led by eight countries with Saudi Arabia leading the growth while some cut their production to oblige the quotas, said YES Securities. "Additionally, geopolitical concerns including Red Sea transit risks, Iranian sanctions still underpin some risk premium in prices," it said.

A fall in global oil prices directly could have a positive impact on refining margins and improve the marketing segment profitability, particularly for companies like HPCL, BPCL, and IOCL but erode the earnings for the upstream players – ONGC and Oil India, YES Securities added.