ONGC, Oil India shares surge up to 4% intraday, as OPEC cuts 2022 oil demand growth; brokerage sees over 60% upside in both stocks

Shares of Oil and Natural Gas Corporation (ONGC) and Oil India zoomed up to 4 per cent on the BSE in the intraday trade on Wednesday. This was despite a lacklustre show by benchmarks Nifty50 and BSE Sensex.

Shares gained on the back of surge in crude oil prices.  

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State-owned Oil India soared 4 per cent on the BSE to touch a day’s high of Rs 239.35 per share and ONGC jumped over 3 per cent to also hit a day’s high level of Rs 174.4 per share on the BSE intraday. The stock of the latter company was a top gainer on Nifty50 intraday today. 

Crude oil prices increased around 6 per cent on Tuesday amid reports of lower supply by oil producers and easing of lockdown curbs in parts of China, according to a Reuters report. 

In another trigger, OPEC (Organization of the Petroleum Exporting Countries) on Tuesday also cut its forecast for growth in world oil demand in 2022 citing the impact of Russia`s invasion of Ukraine and rising inflation as crude prices soar and the resurgence of the Omicron coronavirus variant in China, Reuters report said.

In a monthly report, the Organization of the Petroleum Exporting Countries (OPEC) said world demand would rise by 3.67 million barrels per day (bpd) in 2022, down 480,000 bpd from its previous forecast, another report of Reuters said. 

ONGC and Oil India have outperformed the Sensex by 74 and 42 per cent respectively, over the last twelve months, as Brent crude price increased by 68 per cent, HDFC Securities said and expected the outperformance to continue.  

The domestic Administered Pricing Mechanism (APM) gas price was revised upwards by 110 per cent to USD 6.1/mmbtu in H1FY23, and brokerage further expected it to further rise by 45 per cent to >USD 8.8/mmbtu in H2FY23.  

HDFC Securities estimated Brent crude price, which is currently at >USD 100/bbl, to remain elevated, as Organisation of the Petroleum Exporting Countries (OPEC) supply growth is likely to lag global demand growth and supply concerns surrounding geopolitical issues would prevail. 

While maintaining a Buy stance, brokerage sees up to 65 per cent upside on ONGC and Oil India with a target price of Rs 275 and Rs 380 per share, respectively.