The Nifty Oil and Gas index was one of the biggest losers in the stock market today, dropping over 1.5% during morning trade. Shares of oil and gas companies slipped by up to 3% as investors grew nervous after new trade tariffs took effect on Tuesday, March 4.
This planned production increase is the first since 2022, and it has raised fears of oversupply in the market. As a result, Brent crude futures fell by 1.6% to $71.62 per barrel, while U.S. West Texas Intermediate (WTI) crude dropped 2% to $68.37 per barrel. These are the lowest levels since December 2024.
Adding to the uncertainty, Trump temporarily suspended all U.S. military aid to Ukraine, creating further geopolitical tensions. These factors combined to weigh heavily on investor sentiment.
The BSE Oil and Gas index also tumbled, dropping 4.66% on Tuesday morning. Since September 2024, the Nifty Oil and Gas index has declined nearly 30%, and year-to-date, the sector is down by 11.62%.
Tyre makers, including Apollo Tyres, Goodyear India, and MRF, also declined by up to 2% due to the impact of falling crude oil prices on their input costs.
For now, the Nifty Oil and Gas index and related industries will continue to face challenges as global economic uncertainties persist.
Why Are Oil and Gas Stocks Falling?
According to a Reuters report, oil prices fell by about 2% on Monday, hitting a 12-week low. This drop came after reports that OPEC+ (Organization of the Petroleum Exporting Countries and its allies, including Russia) plans to increase oil production in April. Additionally, concerns about U.S. tariffs impacting global economic growth and oil demand added to the pressure.
This planned production increase is the first since 2022, and it has raised fears of oversupply in the market. As a result, Brent crude futures fell by 1.6% to $71.62 per barrel, while U.S. West Texas Intermediate (WTI) crude dropped 2% to $68.37 per barrel. These are the lowest levels since December 2024.
Trade Tariffs and Investor Caution
Investors also turned cautious after U.S. President Donald Trump announced that 25% tariffs on imports from Mexico and Canada would start on March 4 without delay. This decision sparked fears of a North American trade war, which could push up inflation and slow economic growth.Adding to the uncertainty, Trump temporarily suspended all U.S. military aid to Ukraine, creating further geopolitical tensions. These factors combined to weigh heavily on investor sentiment.
Impact on Oil and Gas Companies
The Nifty Oil and Gas index was among the worst-performing sectors, with shares of major companies like ONGC and BPCL falling by 3.28% and 2.44%, respectively. Other companies like Indraprastha Gas, Mahanagar Gas, and GAIL also saw declines ranging from 0.44% to 1.5%.The BSE Oil and Gas index also tumbled, dropping 4.66% on Tuesday morning. Since September 2024, the Nifty Oil and Gas index has declined nearly 30%, and year-to-date, the sector is down by 11.62%.
Ripple Effect on Other Industries
The falling crude oil prices had a ripple effect on other industries as well. Paint companies, which rely on crude oil derivatives for 25%-30% of their raw materials, saw their shares drop. Leading manufacturers like Asian Paints, Berger Paints India, and Kansai Nerolac Paints fell by up to 2%.Tyre makers, including Apollo Tyres, Goodyear India, and MRF, also declined by up to 2% due to the impact of falling crude oil prices on their input costs.
What’s Next for the Oil and Gas Sector?
The oil and gas sector remains under pressure due to a combination of factors, including OPEC+ production plans, trade tariffs, and geopolitical tensions. Investors are likely to stay cautious until there is more clarity on these issues.For now, the Nifty Oil and Gas index and related industries will continue to face challenges as global economic uncertainties persist.