Oil Stocks crash after US announces 25% tariff on countries purchasing oil or gas from Venezuela

USA President Donald Trump announced on Monday a 25 percent tariff on imports from any country purchasing oil or gas from Venezuela, along with new tariffs targeting the South American nation itself. India, one of the largest importers of crude oil, is among the nations that could be significantly affected by this move.

What Happened 

India’s tariff challenges are set to escalate following US President Donald Trump’s announcement on March 24 regarding new tariffs on countries purchasing oil and gas from Venezuela. Trump stated that starting April 2, the US will impose an additional 25 percent tariff on nations buying oil from the Latin American country, impacting both direct and indirect oil buyers.

Impact on India

The new tariffs could affect both China and India, as Venezuela exports oil to these countries, along with the United States and Spain. In February, Venezuela exported approximately 500,000 barrels of oil per day to China and 240,000 barrels to the United States, according to experts.

Last year, India imported 22 million barrels of oil from Venezuela, representing just 1.5 percent of its total crude oil purchases. Notably, in December 2023 and January 2024, India became the top buyer of Venezuelan crude, importing 191,600 barrels per day and 254,000 barrels per day, respectively. In January 2024, India accounted for nearly half of Venezuela’s total oil exports.

Here are a few oil and gas stocks that will be impacted by these developments:

1. Oil & Natural Gas Corporation Ltd

With a market capitalization of Rs.3.14 lakh crore, the share price of ONGC Ltd closed at Rs.241.71 per share on Tuesday, falling 1 percent from its previous close. 

ONGC Ltd, India’s state-owned oil exploration and production company, could face indirect consequences from the US tariff policy. Although ONGC does not directly import Venezuelan crude, its subsidiary, ONGC Videsh, holds stakes in Venezuelan oil fields. If Venezuela experiences reduced export revenues due to sanctions and tariffs, these investments could face operational challenges. 

Furthermore, ONGC’s domestic operations might be affected by rising global crude oil prices, as supply constraints resulting from the tariff could drive up costs.

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2. Indian Oil Corporation Ltd

With a market capitalization of Rs.1.85 lakh crore, the share price of Indian Oil Corporation Ltd closed at Rs.130.90 per share on Tuesday, falling 2 percent from its previous close. 

Indian Oil Corporation Ltd (IOC), India’s largest public-sector refiner and fuel marketer, is likely to be significantly impacted by the 25% tariff on Venezuelan oil. Despite diversifying its crude sourcing, IOC still relies on affordable options like Venezuelan crude to manage costs. The tariff will raise the cost of Venezuelan oil, leading to higher refining expenses and potential supply chain disruptions.

As a major fuel supplier in India, IOC could face challenges in maintaining competitive pricing while managing shrinking margins. The company may need to seek alternative crude sources or renegotiate supplier contracts.

3. Reliance Industries Ltd

With a market capitalization of Rs.17.44 lakh crore, the share price of Reliance Industries Ltd closed at Rs.1,285.25 per share on Tuesday, falling 1.3 percent from its previous close. 

Reliance Industries Ltd (RIL), one of India’s largest private refiners, may face significant challenges due to the 25 percent tariff on Venezuelan oil imports. Historically, Reliance has sourced crude from Venezuela to optimize refining margins, as Venezuelan oil is often priced lower than global benchmarks. The new tariff will raise the cost of importing this oil, potentially reducing profitability in its refining segment.

Additionally, higher input costs may force Reliance to pass on the increased expenses to consumers, affecting domestic fuel prices and demand. This could also hurt its petrochemical business, which relies on affordable crude oil derivatives for production.

Written by – Siddesh S Raskar

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