ONGC, Oil India Shares Surge as Crude Oil Prices Hit 2-Month High
ONGC and Oil India stocks gained 4% as crude oil prices hit a two-month high, fueled by economic growth optimism in China and global market trends.
ONGC, Oil India Shares Surge as Crude Oil Prices Hit 2-Month High
Shares of Oil and Natural Gas Corporation (ONGC) and Oil India rose sharply during Friday’s intraday trading session, reflecting gains of 4 per cent each on the Bombay Stock Exchange (BSE). This movement occurred despite a generally weak market performance, driven by higher Brent crude oil prices, which reached their highest levels in over two months.
The increase in crude oil prices is attributed to optimism surrounding economic growth prospects in China. In a New Year address, President Xi Jinping highlighted plans to implement policies aimed at fostering growth in 2025. This announcement has bolstered expectations for increased fuel demand, influencing global crude oil prices. On Friday, Brent crude futures were trading above $76 per barrel, while West Texas Intermediate (WTI) crude hovered around $73.4 per barrel, reflecting gains of 0.3 per cent and 0.36 per cent, respectively.
In contrast to the gains in oil stocks, the BSE Sensex recorded a decline of 0.63 per cent, trading at 79,437 as of 9:59 AM. ONGC’s stock price has fallen 26% from its record high in August 2024, while Oil India’s share price has dropped 38 per cent over the same period.
India Ratings and Research (Ind-Ra) has maintained a neutral stance on the oil and gas sector for the financial year 2025-26. The agency anticipates that the financial health of upstream oil companies will remain closely tied to crude oil price trends. Earnings before interest, taxes, depreciation, and amortization (EBITDA) for these companies could face pressure due to moderating oil prices and declining production from legacy fields. However, the anticipated removal of special excise duties on crude production and increased output from new discoveries are expected to mitigate these effects.
Despite current price declines, upstream companies are projected to maintain robust margins, with production costs estimated at $40-45 per barrel. This leaves an EBITDA margin of $20-30 per barrel. Crude oil prices are likely to remain influenced by global geopolitical developments, production targets set by OPEC+, and demand recovery trends. During Q2FY25, average oil prices stood at $78.7 per barrel, declining to $75.2 in October and $73.02 in November 2024.
