Crude oil prices near 11-year lows, 5 stocks that could be good bets

Crude oil prices are close to 11-year lows on account of excessive supply. A forecast from the International Energy Agency (IEA) that the global supply glut is likely to deepen next year dragging down the prices further. US crude was down 0.2 per cent at $36.24 after falling as low as $34.53 on Monday before ending nearly 2 per cent higher. Brent crude fell as low as $36.33 a barrel on Monday, its weakest since December 2008. A fall below $36.20 would take oil down to levels not seen since 2004.

Crude prices are on a downward spiral since OPEC on December 4 abandoned its output ceiling. In the past six sessions till December 11, crude oil prices shed more than 13 per cent in the inernational markets. On the domestic front, it slid nearly 11 per cent in the past five days. Prices of crude oil in the domestic markets fell from Rs 2,742 per barrel on December 4 to Rs 2,455 per barrel on December 11.

According to markets experts, OPEC is gripped by a deep divide between two factions, one led by the top oil producing nation Saudi Arabia and its rich allies in the Gulf that can stomach cheap oil and another led by Nigeria, Venezuela and other countries that need higher prices to boost their economies. America’s shale gas boom has also had a significant impact on the tapering demand for crude. The overall slowdown sentiment is also hurting crude prices negatively.

In a larger perspective, falling crude oil prices are positive for various sectors. G Chokkalingam, founder, Equinomics Research and Advisory said, “Sectors which would benefit from falling crude oil are oil marketing companies (OMCs), tyre industry, synthetic fiber producers, several range of businesses, which use oil derivatives as core inputs like the producers of lubricants, transformer oils, plastic products, soaps and detergents, etc.”

Nikhil Kamath, director, trading and risk, ZERODHA said, “Some of the sectors positively impacted by lower crude prices are aviation, auto and FMCG companies, with all of these directly or indirectly benefitting from lower crude prices.”