Crude oil under pressure: Energy companies’ shares slip up to 19% – Brokerage picks ONGC, Oil India as best bet, see up to 51% upside

With crude oil prices softening, shares of energy companies witnessed pressure declining up to 19 per cent on the BSE intraday during Monday’s trading session.

The crude oil on Friday slipped four-week low to around 7 per cent, as investors feared that interest rate hikes could slow the global economy and cut demand for energy, according to a Reuters report.

Individually, Mangalore Refinery & Petrochemicals plunged nearly 19 per cent to Rs 76.75 per share, while Chennai Petroleum Corporation plummeted by over 18 per cent to Rs 266.25 per share and Oil India plunged almost 11 per cent to Rs 227 per share on the BSE in intra-day trade.

Similarly, Oil and Natural Gas Corporation (ONGC), Goa Carbon, and Hindustan Oil Exploration were down in the range of 6 per cent to 8 per cent. All the above-mentioned stocks had seen a sharp run-up on higher crude oil prices.

At around 12:10 PM, the S&P BSE Energy index was down 2.3 per cent as compared to 0.42 per cent rise in the S&P BSE Sensex. The energy index hit a multi-year low of 7,439.97 on the BSE in intra-day trade on Monday.

Brent futures fell $5.85, or 4.9 per cent, to $113.96 a barrel by 11:02 a.m. EDT (1502 GMT). The US West Texas Intermediate (WTI) crude fell $6.66, or 5.7 per cent, to $110.93. Both were on track for their lowest close since May 25.

The US dollar last week rose to its highest since December 2002 against a basket of currencies. A stronger dollar makes oil more expensive for buyers using other currencies, the Reuters reported.

Motilal Oswal is bullish on state-owned oil exploration and production companies ONGC and Oil India. It raised EBITDA estimates by 20/15 per cent for ONGC and by 26/20 per cent for Oil India, fueled by an increase in crude assumption to USD100/ 90 per barrel for FY23/24, respectively.

The brokerage reiterates BUY ratings on ONGC and Oil India with target prices of Rs 213 and Rs 368 per share (up to 51 per cent upside), respectively. Key risk remains sustained resolution, removing risks on oil supplies thereby cooling off oil price and windfall taxes, it said.