Oil & Gas shares in focus; ONGC, Oil India, Gail rally up to 10%

MOFSL believes that increasingly positive news related to the Covid-19 vaccine is expected to soon boost global economic recovery
Shares of state-owned oil & gas companies rallied up to 10 per cent on the BSE in the intra-day trade on Friday as crude oil prices extended their northward journey. On Thursday, Brent crude price crossed $50 per barrel-mark for the first time since March on demand recovery and hopes of Covid-19 vaccine.

Among individual stocks, ONGC rallied 10 per cent to Rs 101 in the intra-day trade amid reports that Morgan Stanley has upgraded the stock, citing a higher probability of recovery in average selling prices and improved outlook on domestic production. 

The stock of oil & exploration company crossed the three-digit mark for the first time since February 2020. In the past one month, it has rallied 40 per cent as compared to a 6-per cent rise in the S&P BSE Sensex.

Oil India, meanwhile, gained 10 per cent to Rs 115.55 in the intra-day trade, surging 25 per cent in the past one month. Gail (India), on the other hand, was up 7 per cent at Rs 129 today, soaring 37 per cent in the last one month.

At the last meeting of this historic year, the Organisation of Petroleum Exporting Countries (OPEC) decided to increase monitoring to balance the struggling global oil market. The group has decided on additional voluntary cuts of a mere 0.5mnbopd to 7.2 mn bopd, starting January 2021, as against the scheduled cut of 2 mn bopd to 5.7 mn bopd. This is the second time when OPEC+ has agreed on lower cuts than scheduled as further extensions and impositions of lockdowns in various countries have aggravated the demand-supply mismatch.

"The recent move by OPEC+ would lead to more rigorous control over the global crude oil market until a better balance is struck between demand and supply. This system would also answer the huge inventory build up that is yet to be consumed, as well as increase in production from US Shale (with breakeven ~USD48-54/bbl). The move would result in a more stable crude oil prices, with room for both extending as well as easing of cuts. In line with the same, we keep our crude oil prices unchanged at USD50/bbl for FY22-23E," Motilal Oswal Financial Services said in an oil & gas sector update.

The brokerage firm believes that increasingly positive news related to the Covid-19 vaccine is expected to soon boost global economic recovery.

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