ONGC and Oil India gain 3% in tandem with crude oil prices

Shares of state-owned oil exploration and production companies such as Oil and Natural Gas Corporation (ONGC) and Oil India gained 3% on BSE during Wednesday’s intraday trading in an otherwise lackluster market after prices soared petrol. Crude oil prices rose about 6% on Tuesday amid lower supply from oil producers and an easing of lockdown restrictions in parts of China.

As of 10:47 a.m., ONGC and Oil India were up 3% at Rs 173.85 and Rs 237.20, respectively, on the back of heavy volumes. By comparison, the S&P BSE Sensex rose 0.04% to 58,597 points.

Upstream companies like ONGC and Oil India are expected to post strong profits on the back of higher oil prices. Oil prices surged amid concerns over supply disruptions due to geopolitical conflict in Europe in the quarter ending March 2022 (Q4FY22). Brent prices averaged close to $100/bbl in Q4FY22, with close to $30/bbl added at the end of the quarter due to the war in Ukraine.

Also Read: MCX Crude Oil, Natural Gas: Key Trading Levels to Watch on April 13

HDFC Securities analysts expect the price of Brent to remain high as growth in supply from the Organization of the Petroleum Exporting Countries (OPEC) is likely to lag global demand in due to persistent geopolitical tensions.

“The average Brent price in FY22 was $80/bbl, up 79% year-on-year, driven by the recovery in global demand as economies open up. However, OPEC supply is lagging demand growth due to the Russian invasion of Ukraine. Although there are no restrictions on importing crude oil from Russia currently, some buyers have avoided Russian oil due to uncertainties regarding insurance, transportation, etc. because of the sanctions,” the brokerage firm added.

The U.S. Energy Information Administration (EIA) also estimates that global crude oil supply growth will suffer in 2022.

Analysts expect upside risk to crude oil prices as product inventory levels fall below the five-year range. “Every $10/bbl change in net oil price realization changes ONGC’s FY23E earnings by Rs 7.1/share (10.9%) and Oil India’s earnings by 7. Rs.6/share (7.7%),” the brokerage firm added.

Bias: Positive

Objective: Rs 180

Support: Rs 169.50

The stock is currently trading with a positive bias according to price action/moving averages on the daily and weekly charts. However, momentum oscillators present a mixed picture for now.

According to the daily charts, following today’s sharp rise, the stock managed to trade and hold above its 20-DMA (daily moving average) placed at Rs 171. Sustained trade at above this level can help the stock climb to Rs 180-odd levels. The short-term bias is likely to remain positive as long as the stock holds above Rs 169 – its 50-DMA.

Among the major momentum oscillators on the daily charts, the MACD (Moving Average Convergence and Divergence) and the Slow Stochastic gave a minor buy signal. The 14-day RSI (Relative Strength Index) is in the neutral zone, while the DI (Directional Index) indicates a lack of strength in the existing trend.

While according to the weekly momentum oscillators, the Slow Stochastic is clearly in favor of the bears, and the MACD is also showing signs of fatigue. Thus, it seems that the upward movement at the counter may be short-lived.

Oil India

Bias: related to the range

Support: Rs 225

Resistance: Rs 245

The stock appears to be consolidating in a wide trading range of Rs 225 to Rs 245 since early March. Momentum oscillators on the daily charts also indicate indecision at current levels. The trendline indicates strong support around Rs 220 odd levels.

An upside breakout may trigger a jump to odd levels of Rs 260. While a sustained trade below the odd level of Rs 220 may trigger a drop to Rs 197, the weekly chart shows.

(With contributions from Rex Cano)

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