Oil Prices Surge: ONGC, Oil India Shares in Spotlight Amid Iran Tensions
Overview
Oil prices have climbed to a 12-week high, driven by geopolitical tensions in Iran, putting Oil & Natural Gas Corporation Ltd. (ONGC) and Oil India Ltd. shares in focus. Despite recent three-day gains, both companies have experienced negative returns over the past year. However, each $1 increase in crude oil price offers a substantial revenue boost, estimated between ₹300-₹400 crore per company.
Stocks Mentioned
*Shares of state-owned energy giants Oil & Natural Gas Corporation Ltd. (ONGC) and Oil India Ltd. were in focus on Wednesday, January 14, as global crude oil prices continued their ascent. This surge, driven by mounting geopolitical concerns related to Iran, has propelled Brent Crude toward the $66 per barrel mark, marking a 12-week high. The development is expected to influence trading activity for these major Indian public sector undertakings.
Geopolitical Headwinds Drive Oil Prices
Global oil markets are experiencing a notable uplift, pushing benchmark Brent Crude prices toward the $66 per barrel mark, a level not sustained in over three months. This upward trajectory is primarily attributed to escalating tensions surrounding protests in Iran and the potential for increased United States involvement in the region. These geopolitical factors are creating significant supply uncertainty, a common driver for commodity price spikes. The market had recently seen prices dip to multi-year lows amid expectations of a de-escalation in the Russia-Ukraine conflict.
Revenue Potential Amid Rising Crude
The sustained rise in crude oil prices presents a direct financial benefit to domestic exploration and production companies. Industry analysts estimate that for every $1 increase per barrel in crude oil prices, both ONGC and Oil India could see their revenues grow between ₹300 crore and ₹400 crore. This potential for enhanced profitability is a key factor underpinning investor interest in these stocks, especially during periods of geopolitical instability in major oil-producing regions.
Trading Activity and Recent Performance Divergence
Both ONGC and Oil India witnessed substantial trading volumes on Tuesday, signaling robust investor engagement. ONGC traded 2.25 crore shares, significantly exceeding its 20-day average of 83.4 lakh shares. Similarly, Oil India saw over 1.2 crore shares change hands, a marked increase from its 20-day average of 16.2 lakh shares. Despite these recent gains, with Oil India shares up 9.3% and ONGC shares up 5.2% over the past three consecutive trading sessions, their performance over the last 12 months remains in negative territory. ONGC has declined 6.5%, while Oil India has seen a 3.5% dip in the same period, highlighting a divergence between short-term momentum and longer-term trends.
