Shares of several Indian sugar companies surged sharply on Wednesday, March 4, bucking the broader market decline, as rising global crude oil prices lifted sentiment for the sector. Stocks including Dhampur Sugar Mills, Dalmia Bharat Sugar, Dwarikesh Sugar Industries and Praj Industries were among the top gainers during the session, advancing between 6% and 10% even as the wider market remained under pressure.
The rally in sugar stocks came as global energy markets reacted to the escalating US-Iran conflict in West Asia, which pushed crude oil prices close to $120 per barrel earlier this week. Higher oil prices are widely seen as supportive for ethanol production, which in turn boosts demand for sugarcane and benefits sugar companies.
Among the biggest movers, Dwarikesh Sugar Industries climbed 8.5%, while Dalmia Bharat Sugar rose 7.7% and Dhampur Sugar Mills gained 7.5%. Bajaj Hindusthan Sugar advanced 6.8%, followed by Uttam Sugar Mills up 6.2%, Praj Industries gaining about 6%, Shree Renuka Sugars rising 4.8%, and Balrampur Chini Mills adding 3.5%.
Crude oil surge drives optimism for ethanol demand
The rally in sugar stocks was largely triggered by a sharp spike in crude oil prices after the conflict in the Middle East intensified, raising concerns about disruptions to global oil supply.
On March 9, Brent crude — the global benchmark — surged over 25% to $119.50 per barrel. Meanwhile, West Texas Intermediate (WTI) crude, the US benchmark, briefly climbed to $119.48 per barrel.
Oil prices have risen sharply as the war, now in its second week, threatens energy production and shipping routes in the Middle East — a region that plays a crucial role in global oil supply.
A major concern for markets is the Strait of Hormuz, one of the world’s most critical oil transit routes. According to research firm Rystad Energy, roughly 15 million barrels of crude oil — about 20% of global oil supply — pass through the strait each day.
In response to the growing bottlenecks, Iraq, Kuwait and the UAE have reduced oil production as storage facilities fill up due to difficulties exporting crude. At the same time, energy infrastructure in the region has also come under attack since the conflict began, worsening supply concerns.
The surge in oil prices is rippling through global markets and pushing fuel costs higher, particularly affecting Asian economies that rely heavily on energy imports from the Middle East. The last time oil prices approached similar levels was in 2022, following the outbreak of the Russia-Ukraine war.
How Crude oil impacts Sugar stocks?
Rising crude oil prices tend to make ethanol production more economically attractive, encouraging producers to divert more sugarcane toward biofuel instead of sugar. It often benefits sugar companies as higher global prices improve profitability for the sector.
When oil becomes expensive, blending ethanol with petrol becomes more economical for fuel suppliers. As a result, sugar mills often divert a larger share of sugarcane toward ethanol production instead of sugar, improving their profitability.
As the US-Israeli conflict with Iran enters its tenth day, production cuts in countries such as Iraq and Kuwait have added to fears of a prolonged energy supply disruption.
What is ethanol blending?
Ethanol is a biofuel produced from agricultural sources such as sugarcane, corn and other grains. It burns cleaner than petrol and is considered a renewable alternative to fossil fuels.
To reduce dependence on crude oil imports and lower carbon emissions, the Indian government has mandated blending ethanol with petrol. This policy requires oil marketing companies to mix a certain percentage of ethanol with petrol before selling it in the market.
The ethanol blending program also supports farmers and the agricultural economy, as it increases demand for crops such as sugarcane and corn. By creating an additional revenue stream for sugar mills and boosting farm incomes, the policy has become a key driver for India’s sugar industry in recent years.
