Oil and Pure Fuel Company (ONGC) has regained its Rs 2-trillion market capitalisation (market-cap) mark because the inventory rallied one other 8 per cent to Rs 159.75 on the BSE in Tuesday’s intra-day commerce on the again of upper crude oil costs. The inventory of the state-owned oil exploration & manufacturing (E&P) firm was buying and selling at its highest stage since November 2018.
The rising home gasoline provide and enchancment in oil and gasoline realisation ought to drive upstream firms’ earnings progress and valuations.
At 10:57 am; ONGC was buying and selling 7.5 per cent greater at Rs 158.60, with a market of Rs 199,523 crore, the BSE information reveals. As compared, the S&P BSE Sensex was down 0.09 per cent at 59,246 factors. In previous one month, the inventory has surged 31 per cent, as towards a 2 per cent rise within the benchmark index.
The crude costs hit three-year excessive after Opec and allies determined to proceed with their oil provide plan of their newest assembly. Opec+ agreed to extend oil provide by 400K bpd in November as per the sooner plan.
The Group of the Petroleum Exporting Nations, Russia and their allies, referred to as OPEC+, have confronted calls from massive customers, resembling the US and India, for additional provides after oil costs surged greater than 50 per cent this yr. Brent crude roared above $81 a barrel on information that the group would stick with its plan for gradual extra manufacturing, moderately than providing extra provide to the market, the Reuters reported.
Brent crude worth is presently at >USD 75/bbl, up 47 per cent YTD, pushed by restoration in world demand with opening up of economies. The US was hit by Hurricane Ida in July finish, which has resulted in disruption of manufacturing from Gulf of Mexico (GoM) of ~1.7mb/d in August. The Worldwide Power Company (IEA) expects provide from GoM to normalise by Q4CY22.
With crude oil and product stock in decrease half of the five-year vary and EIA estimating world crude oil provide progress to lag demand progress in 2021 as world restoration continues to collect tempo, we see an upside danger to crude oil costs, HDFC Securities mentioned in sector replace.
We anticipate, in FY23E, ONGC (standalone) to provide 23.0 mmt of oil and 24.8 bcm of gasoline, and Oil India to provide 3.2 mmt of oil and a pair of.6 bcm of gasoline. Growing gasoline costs and rising Brent crude oil worth ought to enhance realisation and in flip drive earnings CAGR of 30-54% over FY21-FY23E for ONGC and OIL. ONGC must also profit from improve in gasoline manufacturing by as much as 12mmscmd over FY21-25E as manufacturing from its KG basin blocks, the brokerage agency mentioned.