Shares of Oil India, ONGC gain up to 10%; check what's driving oil stocks

Shares of state-owned upstream oil companies Oil India and Oil and Natural Gas Corporation (ONGC) extended gains in Wednesday’s trade, tracking a sharp rebound in global crude oil prices.

Oil India Ltd was trading 8.13 per cent higher at Rs 485 on the NSE at around 11:56 am IST, after touching an intra-day high of Rs 492. The stock saw strong buying interest through the session, backed by heavy volumes.

ONGC shares also moved higher, gaining 6.50 per cent to Rs 264.07 at around 11:57 am IST, as investors bet on improved realisations amid rising oil prices.

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Crude price rally lifts upstream stocks

The rally comes after global oil prices jumped nearly 3 per cent overnight. According to a Reuters report, crude prices surged as a winter storm disrupted production and temporarily halted US Gulf Coast crude exports.

Brent crude futures settled at USD 67.57 per barrel, up 3.02 per cent, while US West Texas Intermediate crude closed 2.9 per cent higher at USD 62.39 per barrel.

Analysts note that upstream companies’ earnings are closely linked to crude prices. A USD 1 per barrel increase in Brent crude could lift standalone annual EPS of upstream companies by around 2 per cent.

Company-specific triggers remain in focus

Apart from higher crude prices, ONGC has been in focus following recent strategic developments. The company, through its joint ventures with Mitsui O.S.K. Lines of Japan, has signed shipbuilding contracts with Samsung Heavy Industries for two Very Large Ethane Carriers (VLECs).

Separately, ONGC has reportedly floated a tender to hire technical experts for its western offshore oilfields and has reached out to global energy majors, including Shell, ExxonMobil, TotalEnergies and Chevron, with bids due by March 16, according to media reports.

Outlook

Market participants said upstream oil stocks are likely to remain sensitive to crude price movements in the near term. Policy support for higher domestic production and favourable currency movements could also aid earnings visibility for companies such as Oil India and ONGC.