Oil India hits 31-month high; ONGC at 52-week high on gas price hike

Shares of oil exploration & production (E&P) companies continued their north-bound journey, gaining by up to 3 per cent on the BSE in Friday’s intra-day trade in an otherwise weak market on the back of 62 per cent hike in domestic natural gas prices.

The price of domestic-produced natural gas has been hiked to $2.9 per million British thermal units (mBtu) for the October 2021-March 2022 period on Thursday. The ceiling price of natural gas produced from deepwater, ultra-deepwater, and high pressure-high temperature (collectively called difficult) discoveries has also been hiked to $6.13 per mBtu. The hikes follow a firming up of gas prices on global benchmarks that dictate domestic rates, the Business Standard reported.

A further hike in domestic gas prices is expected in the next revision in April, 2022. The beneficiaries of the gas price hike include upstream companies like Oil and Natural Gas Corporation (ONGC), Oil India, and to a much lesser extent Reliance Industries.

The stock of Oil India hit a 31-month high at Rs 267.70, up 3 per cent on the BSE in intra-day trade on Friday. The stock now trades at its highest level since March 2018. ONGC hit a 52-week high of Rs 149.60, and was also up 3 per cent on the BSE. It surpassed its previous high of Rs 149 touched on September 29, 2021. In comparison, the S&P BSE Sensex was down 0.64 per cent at 58,745 points at 09:36 am.

The sharp rise in gas prices (on a lower base) is as per expectations. While upstream companies will benefit from the price hike, City Gas Distribution (CGD) companies have hiked prices in Q2FY22. On the margin front, potential hike in prices coupled with global liquefied natural gas (LNG) price trend will be the key monitorable, ICICI Securities said in a note.

Oil and Natural Gas Corporation Limited (ONGC)