Chemical Sector Declines Due To Rise In Crude Oil Prices

Kiri Industries, Bhageria and IGPL shares were trading 5 per cent lower on the National Stock Exchange (NSE) today. Chemical sector was seen moving down on the back of global crude prices rising on expectations that the OPEC – Organization of the Petroleum Exporting Countries will reach a deal in its Vienna meeting later this month to cut output. Crude oil is a major raw material used in making chemicals. Increased demand in Europe and US during winter months is likely to push up the prices further.

The Indian basket of crude, which represents the Oman, Dubai and Brent crude average, during the last fortnight priced at 44.80 dollars per barrel. OPEC, which consists of 13 oil producing countries, is of strategic importance to the Indian subcontinent as it accounts for 85% and 94% of India’s crude oil and gas imports respectively.

The cartel of oil producers had agreed to a production target of 32.5-33 mn barrels per day at the Algiers meeting last month. The next Opec meet is on 30^thNovember.

Sources had said that the government could consider reducing the excise duty on petroleum if crude stayed beyond 50 dollars for a certain period. The price has been volatile in the recent weeks but the government doesn’t expect it to average above 50 dollars per barrel in the current financial year.

Meanwhile, Kiri Industries share price was trading 5.57 per cent lower, Bhageria share price was down 5 per cent and IGPL share price was seen down 4.99 per cent on the NSE today.

Dharmendra Pradhan Oil minister had said there shouldn’t be any knee-jerk reaction. He said not to jump with joy on a 3-day slide in oil prices and not to overreact to a three-day spike in rates.

The Centre has raised excise duties on fuel multiple times to gain from a sharp slump in prices since the 2^nd half of 2014 and 2015. The excise duty levied on petrol was around Rs.21.48 per litre, an increase of 126.6 per cent from Rs.9.48 per litre in July 2014. In diesel, the duty has been hiked 386.8 per cent to Rs.17.33 per litre from Rs.3.56 per litre in July 2014. The government has garnered up to Rs.70,000 cr through duty hikes since the month of November, 2014.

India spent 64 billion dollars (Rs.416,361 cr) on import of 202.9 million tons of crude oil in 2015-16, down from 112.7 billion dollars (Rs.687,416 cr) spent on 189.4 mt in the previous year.