Though ATF prices fall sharply, aviation stocks fall for no known reason

Aviation stocks tumbled in Thursday’s first half. There are two reasons for sector being in focus: Organization of the Petroleum Exporting Countries’ (OPEC) decision to cut down crude oil production; and Aviation Turbine Fuel (ATF) price cut.

Petrol price is hiked by a marginal 13 paise a litre while diesel rates were cut by 12 paise in line with global trends. Jet fuel price is cut by 3.7 per cent to 1881. The fall in jet fuel prices comes after two months of price rise.

Though there is price cut in jet fuel, a judgemental decision has come from OPEC on Wednesday after market hours to cut the crude oil production by about 1.2 million barrels a day by January. The cut of 1.2 million barrels per day (bpd) was at the upper end of expectations (0.7-1.2 million bpd). An additional cut of 0.6 million bpd from non-OPEC countries could significantly maintain equilibrium.

After reduction in crude output, prices of crude oil in international market may rise to USD 55 per barrel. This would compel oil companies to hike ATF to compensate business needs. Due to the fear of rising ATF in near term, the share prices of aviation companies have fallen on December 1.

Major Aviation companies tumbled

Spicejet: -3.96 per cent

Jet Airways:  -3.84 per cent

Interglobe Aviation: -1.33 per cent

Global Vectra Helicorp: -1.36 per cent