Crude Oil Price Spike: The impact of every dollar rise on Indian companies

Oil sensitive stocks are back in the spotlight. Shares of India's state-run oil refiners Hindustan Petroleum Corporation Ltd., (HPCL), Bharat Petroleum Corporation Ltd. (BPCL), and Indian Oil Corporation (IOC) had sold off on Thursday after crude oil prices hit $70 per barrel due to deteriorating tensions in the middle east.

On Friday, global crude oil prices have surged as much as 12% after Israel launched targeted attacks on facilities housing Iran's nuclear program.

Iran's Supreme Leader has confirmed that multiple commanders and scientists have been killed in the attack and also vowed to retaliate to the attacks.

Brent spiked more than 12%, topping $77 a barrel, while West Texas Intermediate also soared by a similar quantum.

Rising crude oil prices are negative for Oil Market Companies (OMCs) like HPCL, BPCL and Indian Oil, along with others like aviation companies, paint companies and tyre stocks, as it leads to an increase in their cost, thereby impacting their margins. For paint companies, 50% of their input cost is linked to crude.

On the flip side, the rise in oil prices is beneficial for upstream oil explorers like ONGC and Oil India. Rising oil prices can benefit annual revenue of ONGC and Oil India between ₹300 crore and ₹400 crore for every $1 per barrel rise in oil prices.

However, the Earnings Before Interest, Tax, Depreciation, and Amortisation (EBITDA) of the OMCs could be hit by ₹200 crore to ₹300 crore.