Crude bounce back to $105: ONGC, Oil India, MRPL, Chennai Petro gain up to 4.5% on higher oil prices – What brokerage says

Energy companies’ stocks – Oil and Natural Gas Corporation, Oil India, Mangalore Refinery & Petrochemicals (MRPL), and Chennai Petroleum Corporation – surged up to 4.5 per cent on the BSE intraday trade on Tuesday, as the crude oil prices bounced back to $105 per barrel level on Monday.  

According to a Reuters report, crude oil prices rose more than $5 on Monday, boosted by dollar weakness and expectations that the US Federal Reserve won't raise interest rates by a full percentage point at its next meeting to combat inflation. 

Individually, MRPL shares gained most of all up by 4.5 per cent to Rs 74.7 per share, followed by ONGC and Oil India shares up around 2.5 per cent each to Rs 133.25 and Rs 189 a share, respectively on the BSE intraday on Tuesday.  

Similarly, Chennai Petroleum gained by around 1 per cent to Rs 272.7 per share on the BSE intraday, respectively.  

At around 10:50 AM IST, Brent crude was quoted at $ 105.8 per barrel. US WTI crude futures were at $98.98. Brent futures, although, off from the 2022 highs of $139.13 a barrel, were still up a solid 44.3 per cent on a year-to-date basis.  

The oil market may tighten further as the EU’s embargo on Russian oil takes full effect by end-CY22 amidst limited OPEC+ spare capacity and OPEC+ resistance to sharper output hikes, JM Financial said in it report on Oil & Gas sector on Tuesday. 

The brokerage maintained a Buy stance on both ONGC and Oil India with target prices of Rs 210 and 280 per share, respectively, as they are the key beneficiaries of high crude and gas prices. At the current price, ONGC/Oil India is discounting USD 45-50/bbl crude price, it added. 

Oil product supply has failed to keep up with the seasonal increase in demand due to a number of refinery outages and tight spare capacity outside of China, JM Financial also said in its report.