Softening in crude oil prices leads to 8% correction in ONGC shares; ICICI Direct bullish, revises stance from Buy to Hold

Oil and Natural Gas Corporation Limited's (ONGC) shares declined on Tuesday for the second straight session. The shares of this oil exploration and production company has slumped over 8 per cent on the BSE over to trading sessions. 

On Tuesday, the stock fell almost 6 per cent to touch day’s low of Rs 161.65 per share on the BSE intraday trade. 

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The decline in ONGC shares was mainly due to softening of crude oil amid easing geopolitical situations between Russia-Ukraine. Oil India Limited shares also ended in the red. 

The impact was also seen on Oil Marketing Companies (OMCs) including Indian Oil Corporation Limited (IOC), Bharat Petroleum Corporation Limited (BPCL) and Hindustan Petroleum Corporation Limited (HPCL), which slipped between 2-3 per cent intraday on the BSE,

According to Reuters report, “Oil prices fell more than 5 per cent on Monday to the lowest in nearly two weeks amid hopes for progress toward a diplomatic end to Russia's invasion of Ukraine - a development that would boost global supplies - while a pandemic-linked travel ban in China cast doubt on demand.” 

Brent futures slided $5.77, or 5.1 per cent, to settle at $106.90 a barrel, while U.S. West Texas Intermediate (WTI) crude fell $6.32, or 5.8 per cent, to settle at $103.01. Earlier this month, the crude oil price had hit multi-year high of US $130 per barrel due to Russia-Ukraine tensions. 

According to ICICI Direct brokerage report, “Global oil & gas prices surged sharply amid concern over supply disruption following the geopolitical conflict in Europe. Russia is a major supplier of oil & gas to the world, Europe and it constitutes 12 and 31 per cent of oil requirement, respectively.” 

It said, “ONGC will gain from increase in oil prices amid geopolitical conflict. We revise rating from HOLD to BUY on ONGC amid favourable oil prices and value ONGC at Rs 225 per share, nearly 40 per cent upside. Surge in oil prices will lead to better realisation, benefitting ONGC.” 

The stock has been one of the top losers in the Nifty50 index for second day in a row. At around 03:10 pm, it is trading around 5 per cent lower to Rs 164 per share on the BSE, as compared to over 1 per cent plunge in the S&P BSE Sensex.