Oil at US$50: Who will benefit?

OPEC and other major oil producers negotiated to cut oil production by almost 1.2 million barrel a day, in the first week of December. This translates to a 8,00,000 bpd cut by OPEC members. However, the market seems to be ignoring this move as oil prices are continuously falling in the international market despite this production cut. As the production cut failed to revive oil prices, OPEC is said to have called an extraordinary meeting.

After touching a high of almost US$ 84 for a barrel in the September month, crude oil prices are now falling and presently is near US$ 50 a barrel. One of the reasons for this oil price plunge is excessive supply from US. 

Whatever be the reason, this fall in oil prices would be beneficial for the Indian economy which imports nearly 80 per cent of its oil demand. While there are many sectors such as tyre, chemicals, paints, airline etc. which use crude oil as their major raw material would be benefiting from oil prices. As crude oil in the last quarter was heading northward, the margin of players which caters to above mentioned players were impacted badly. Thus in the current lower oil prices scenario, these sectors are likely to see margin improvement which in turn would positively affect their profitability. 

Apart from this, weakening of crude oil prices may have some positive impact on the overall market as both factors have an inverse correlation between them as depicted in the below chart.