Markets didn’t do much last week. Typical range-bound play with sector specific news. But something interesting was happening in one space — Crude oil prices
Crude prices have crashed last week
WTI fell -13% and Brent crude too fell 10%+ as rising interest rates combined with easing some of the supply concerns along with slowdown in demand from china due to their covid policy is weighing on the prices of oil.
Will market gain?
But, will it translate into gains for equity markets? Not necessarily
I’ve done a post on the same topic:
OMCs are major beneficiaries
With consecutive quarterly losses, Oil marketing companies like IOC, HPCL and BPCL have faced huge losses of late and this down move, if sustained may help improve some of the short term concerns of the sector.
Good news for Economy
Ultimately, this is good news for economy as fuel prices are one of the key determinants in inflation. Once inflation is stabilized, the focus can be turned to growth
I think we’re getting to the point where the risk reward is getting favourable for a bullish position in Crude Oil. The points being -
1- Unrest has started in China and they can’t stay in lockdown for very long.
2- US SPR reserves need to be replenished.
3- The market has overestimated the inflation aspect and I’m in the camp that inflation is going to fall fast and demand destruction wouldn’t be as much as expected.