Crude oil prices have dropped by more than 5% in just two trading sessions owing to expectations of increased production by OPEC+ in October amid demand concerns in China and the US. OPEC+ is planning to increase output by 180,000 barrels per day(bpd) in October as a part of their unwinding of recent supply cuts. Over and above this, the Arabian Gulf Oil Company has ramped up production to 120,000 bpd to meet domestic demands. It might further escalate the price drop. Technical charts indicate fresh selling pressure with support levels at 5500.

A decline in crude oil prices benefits oil marketing companies(OMCs) and paint manufacturers, as it reduces the input cost and improves the margin outlook. OMCs can also restock at reduced prices to capitalize on inventory gains. Asian Paints, Berger Paints India, Shalimar Paints, Kansai Nerolac Paints, Akzo Nobel India and Indigo Paints gained during the trading session ended 4th September while the broader Nifty 50 closed nearly flat at negative 0.32%. Shares of OMCs like HPCL, BPCL and IOCL rose 1-5%. The shares of HPCL rallied up to 5% to touch a new high of 447.60 and closed the day at 445.10. On the other hand, the fall in crude prices will hurt oil drilling stocks like Oil India and ONGC as it creates margin pressure. Since the price advantage will not reflect immediately in the short term in the refined products and inventory value reduction owing to old stocks will put a dent in the margins. This was evident in the trading session ending on 4th September as both ONGC and Oil India witnessed steep falls at a range of 2.5 – 6%.