Aviation stocks on the rise

The aviation stocks always move in opposite direction to the crude oil prices – when crude price rises, aviation stocks drop and vice versa.

Oil prices are almost at a 6-month low since yesterday as the ongoing supply overhang continues. This is even when OPEC is trying its level best to prop by the prices through production cut.

Crude prices continue to remain low due to various reasons – ramping up of shale gas production in USA and also increasing US rig count, rising inventories every week in the US, increased production in Nigeria and Libya, weak compliance by key OPEC members Iraq and the UAE and last but not the least, higher exports and production from Russia. All these factors together are contributing to the supply gut.

For aviation industry, lower crude price translates into better margins as no one is really passing on the cost benefit to passengers – so fare remains up while cost of turbo fuel goes down.