Crude’s slide continues, oil companies' shares fall in sync

MUMBAI: Oil prices plummeted to sixand-a-half year lows as concerns over demand-supply mismatch heightened amid slowing demand from China even as producers such as Iran pumped in more supplies.

While the fall in crude prices would help India significantly reduce its import bill, shares of energy companies declined due to uncertainty in the market. ONGC, GAIL, Cairn India and Oil India fell to their respective 52-week lows.

“Iran and Iraq are adding more crude to an already oversupplied market and the outlook is depressing on the demand side as well because of a possible Chinese slowdown. Overall, there is a bearish mid-term outlook for crude,” said Debasish Mishra, senior director- consulting at Deloitte Touche Tohmatsu India.

“We don’t expect a sharp recovery any time soon. This is helping India to reduce the import bill, however, if China enters a sustained slowdown, the situation may hurt India’s overall economic prospects. The upstream companies would be impacted the most as cash flows would be severely impacted and they will be forced to recalibrate their investments,” said Mishra.

On Monday, tracking the selloff in global equity markets, benchmark Brent crude fell below $45 a barrel for the first time since March 2009. October Brent crude fell $1.79 on London’s ICE Futures exchange to $43.69 a barrel. On the New York Mercantile Exchange, light, sweet crude futures for delivery in October lost close to $2 a barrel to below $39 a barrel for the first time since February 2009. For every $1 per barrel decline in crude prices, India saved Rs 6,500 crore on the import bill.

The biggest energy losers on the Bombay Stock Exchange were Cairn India (-13.5%), GAIL (-12.8%), ONGC (-11.2%), HPCL (10%) and Reliance Industries (-8.6%).