Brent crude prices slipped below the $59 per barrel mark on Monday after the commodity lost almost 4.5% in trade. This is the lowest level oil prices have seen since February 2021.
The bearish trajectory of oil prices is also very prevalent this year, with Brent crude prices down 20.8% in 2025 so far. This is the worst of the calendar year the commodity has had since 2020.
April 2025 also saw oil prices decline a total of 15.6%, the biggest monthly decline since November 2021, and the first five days of May 2025 have seen Brent crude fall 6.3% already as well.
Why Are Oil Prices Falling?
One of the key reasons is the high amount of oil being pumped globally during a time of fears of global demand.
In a shocking move in April, OPEC+ decided to move ahead with their decision to unwind the oil production they had voluntarily held back for months. The organisation has agreed to surge production by 411,000 barrels per day in June, marking the second consecutive month of a production hike.
On the other hand, Trump's slew of tariffs across the globe has raised fears of a recession that will slow demand.
This is where the bearish movement of oil comes into place – the law of supply and demand states that when a commodity has a high supply but low demand, the price of that commodity typically decreases, which is what the market has been seeing.
Impact On Indian Companies
For oil marketing companies like Indian Oil, Hindustan Petroleum, and Bharat Petroleum, lower oil prices stand positive. Lower oil prices help the company expand their margins, allowing them to profit more per unit of product sold.
For oil exploration companies like Oil and Natural Gas Corporation Ltd. and Oil India Ltd., lower oil prices stand negative, as they directly lower the revenue the companies earn per barrel of oil sold.
For sectors like paints, aviation, tyres, lubricants, manufacturers, cement and chemicals, lower oil prices stand positive. Since a major chunk of the raw materials used by the companies in these sectors are derivatives of oil, lower prices mean lower costs.
However, it is key to note that for the companies in the space to actually realise these benefits, crude prices need to stay around current levels since short-term fluctuations don't tend to have any major financial impact because of the prevalent hedging strategies.
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