Which companies will benefit from fall in oil prices and which firms will be hit? Here’s the analysis

Oil prices came under pressure due to oversupply concerns after OPEC+ (a group of oil-producing nations) decided to roll back production cuts in its 3 March 2025 meeting. The oil group had cut 2.2 mbpd (million barrels per day) of oil production in November 2023 but has now decided to release such output over April 2025 and September 2026.

This increased supply, coupled with concerns about the impact of Trump’s tariffs on global economic growth, has dragged the Brent crude price below $70 per barrel. The price fell to $69.3 per barrel on 5 March, the lowest since September 2024.

Oil prices fell after move to increase oil supply by OPEC+, tariff concerns
Supply concerns and global uncertainties drive crude lower.

However, the price surged after OPEC+ issued a new plan on 20 March 2025 to manage oversupply concerns. This, along with fresh sanctions by the US on Iran, is also supporting the oil price. The price was $72 per barrel on 20 March 2025.

Despite ongoing adjustments by OPEC on oil supply and production plans, the prices are expected to remain volatile amid demand concerns.

The prices declined by 3.5% year-to-date and 16% year-on-year. Experts believe that the prices will remain under pressure. While JM Financial has lowered its Brent price forecast to $70 per barrel (from $75 per barrel) for 2025-26, ICICI Securities puts it around $70 per barrel over the next 12 months. An Emkay report sees $70-75 per barrel as a more realistic range than the earlier $75-80 estimate. The International Energy Agency, in its report last week, estimated a supply surplus (due to OPEC+) in 2025 which will keep oil prices lower. The report has also expressed concerns about oil demand due to escalating trade tensions.

Most companies have strong buy ratings

India is a net importer of crude oil, and lower oil prices will benefit the economy by lowering the import bill. Subdued oil prices will also support the rupee-USD exchange rate.

Oil is used as an input for several industries. Low prices reduce input costs of end-user industries and improve their profit margins. This boosts investors’ confidence and helps the stock market. The benchmark Nifty 50 index has gained over 1.9% in the first week of March 2025 supported by a decline in oil prices. The oil prices slump will influence some sectors in various ways.

Oil & Gas sector

The change in oil prices impacts various sub-segments of the oil & gas industry. Here is an impact analysis:

Upstream firms Impact: negative

• Upstream oil & gas companies extract oil and natural gas and may see a decline in realisations as the oil prices decline.
• Every $5 per barrel decline in oil price decreases EPS (earnings per share) of upstream companies by 8-10%, says Swarnendu Bhushan, Co-Head of Institutional Research, PL Capital.utlook
• Price correction in the last three months has made valuations attractive for both ONGC and Oil India.
• ONGC share price has fallen by 1% whereas Oil India has corrected by 7% in the last three months.
• The 12-month forward EV/EBITDA (Enterprise Value/Earnings before interest, taxes and depreciation and amortisation.) of ONGC and Oil India is currently at 52% and a 15% discount to the industry median, according to Reuters-Refinitiv.

Downstream firms Impact: mixed

• Downstream or Oil Marketing Companies (OMCs) will see a jump in their marketing margins due to a fall in oil prices.
• Marketing margin is the difference between the price at which oil products (petrol, diesel) are procured and the price at which it is sold to dealers.
• Analysts say that every $1 per barrel decline in oil prices raises gross marketing margins on auto fuels by 50 paisa per litre.
• The higher marketing margins will help OMCs in reducing their LPG under-recoveries.
• Analysts have raised concerns about government actions in the form of excise duty increase or a cut in retail prices, which could impact marketing margins.Outlook
• The price correction in the last three months has made valuations reasonable.
• While both Indian Oil and BPCL corrected by over 6% each in the last three months, HPCL is down by more than 15%.
• Analysts from Emkay and ICICI Securities remain constructive on OMCs.JM Financial maintains a cautious view despite balanced risk-reward.

City Gas Distribution (CGD) segment

Impact: Marginally positive

• CGD companies will benefit from a fall in oil prices as it helps reduce their gas sourcing costs. They source gas through a mix of domestic sources (also known as APM) and the international LNG market.
• While APM gas price is governmentregulated, spot LNG prices are costly and volatile.
• The government is reducing the allocation of APM to CGDs amid domestic supply shortages and therefore, CGDs have to rely on costly LNG to meet their gas demand.
• A fall in oil prices will provide relief to CGDs by reducing oil-linked term LNG prices.

Outlook

• The decline in APM allocation and weak rupee (increase in LNG import costs) will keep margins under pressure.
• Antique Broking remains negative on CGD space and maintains a hold on Mahanagar Gas and Gujarat Gas and a sell on IGL.

Paints sector

Impact: positive

• Paint companies use crude-based inputs (monomers, aromatics and solvents) as raw materials. A fall in oil prices will reduce the cost of inputs and improve gross margins.
• Mayank Mundhra, FRM- VP Risk & Head Research, Abans Group, sees a 30-basispoint cost reduction for the sector on every $1 per barrel decline in oil prices.

Outlook

• Despite visible signs of demand recovery in the March 2025 quarter and benefits from lower oil prices, there are concerns.
• Valuations are at a discount and reflect challenges from increased competition.