Indian Stock Market News, Equity Market and Sensex Today in India | Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Is the Oil Market Getting Weary of OPEC's Intervention?
Tue, 23 May Pre-Open

Saudi Arabia pledged to do 'whatever it takes' to the end the crude oil supply glut. Following a terrible week for crude oil, the big producers are naturally worried. The latest data found that, while production had fallen, crude oil exports didn't fall as much.

Either countries were getting rid of excess stocks, which would be temporary. Or they weren't actually cutting production, which is more likely.

The situation presents a further challenge to Saudi Arabia and other OPEC members, which historically held the power to turn supplies on and off when needed.

In the 1970s, the OPEC cartel accounted for over half of global crude oil production. Their market share was more than 50% at one time. If they cut production, the impact on price was immediate. And it persisted. But today, OPEC's market share is down.

And this is largely due to the fear that US production may neutralize the effect of every barrel of oil that is cut by OPEC and other countries. Outbound shipments of crude from USA have surpassed 1.2m barrels a day, more than last month's daily production of Algeria, Ecuador or Qatar - each a member of OPEC.

Further, other OPEC nations, which did not participate in the previous cut, like Nigeria and Libya, will be adding more oil in the market and would continue to do so. Data released on Thursday shows that even Saudi Arabia has increased sales in the market by 275,000 barrels a day.

What does this mean for crude oil prices? The current oil price movement suggests that a production cut would most likely continue, the only contentious part is the time frame. Reports suggests that a time line of 6-9 months is likely to be agreed upon. This however, would not be enough to keep oil prices buoyant given that the US supply taps are open.

If prices were to go up due to OPEC or other factors, new supply would come onto the market. We won't see US$100 crude oil anytime soon. A few years ago, US$100 for a barrel of oil seemed cheap!

For oil importing countries, this is great news. Over the last few years, India's budget deficit has fallen considerably. Mostly due to a lower oil import bill.

Just Released: Multibagger Stocks Guide
(2017 Edition)

In this report, we reveal four proven strategies to picking multibagger stocks.

Well over a million copies of this report have already been claimed over the years.

Go ahead, grab your copy today. It's Free.

NO-SPAM PLEDGE - We will NEVER rent, sell, or give away your e-mail address to anyone for any reason. You can unsubscribe from The 5 Minute WrapUp with a few clicks. Please read our Privacy Policy & Terms Of Use.

Further, lower oil prices reduce cost of fuel and loss wastage (cost incurred for running the refinery and the fuel lost in the system) for oil marketing companies (OMC's). Also, sharp crude oil price movements in a short period of time determine inventory gains and losses for these companies. Shares of OMCs have outperformed the benchmark Sensex by a good margin in the last one year, capping near-term upsides.

For upstream oil companies like Oil and Natural Gas Corp. Ltd and Oil India Ltd, lower oil prices don't augur well, as they translate into lower net price realization. These stocks have outperformed the Sensex in the past one year too. However, lower crude oil prices pose a risk to any potential expansion in valuations in the near future.

Sentiment in one market can impact securities and commodities in other markets. In the past, weakness in the crude oil market caused equity markets to fall and vice versa.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

Read the latest Market Commentary

What else is happening in the markets today? Dig in...

Equitymaster requests your view! Post a comment on "Is the Oil Market Getting Weary of OPEC's Intervention?". Click here!


Views on News

ITI Mid-Cap Fund: Investing in Potential Midcap Companies for Growth (Outside View)

Feb 26, 2021

PersonalFN analyses the features of ITI Mid-Cap Fund and explains the potential this fund has to offer to its investors.

NSE Glitch: Why Did the Market Go Up? (Fast Profits Daily)

Feb 26, 2021

In today's video, I'll discuss why thew stock market went up on Wednesday, 24 February 2021, when the NSE had to shut trading due to a technical glitch.

My Personal Checklist for Your Trading Success (Profit Hunter)

Feb 26, 2021

You my personal trading checklist and you will be well on your way to making it big as a trader.

Make Rs 5,000 Per Day Trading the Market (Fast Profits Daily)

Feb 25, 2021

In this video, I'll show you how to get started on the path to daily trading profits.

Refresh Your Investment Portfolio in 2021 to Align with Your Financial Goals (Outside View)

Feb 25, 2021

Timely review of your investment portfolio is the key, to enable stable returns and work towards your envisioned financial goals during various market phases.

More Views on News

Most Popular

It's the Beginning of a New Bull Phase in Smallcaps (Profit Hunter)

Feb 24, 2021

Last time the smallcap index crossed 19k a big correction followed. Here's what makes it different this time.

Top 5 Stocks Mutual Funds Bought and Sold in January 2021 (Sector Info)

Feb 16, 2021

A look at what India's top equity mutual funds bought and sold in January 2021.

I Would Recommend this Small-cap Stock Over Tesla (Profit Hunter)

Feb 16, 2021

Do you enjoy reading Tesla and Bitcoin stories? Here's a not so famous small-cap stock to profit from the rise of EVs.

Make Rs 5,000 Per Day Trading the Market (Fast Profits Daily)

Feb 25, 2021

In this video, I'll show you how to get started on the path to daily trading profits.


India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms


Feb 26, 2021 (Close)