HPCL vs BPCL, IOCL vs ONGC: Amid crude oil prices sustaining at elevated levels and $110/bbl becoming the new normal for the most-traded commodity on the MCX, stock investors are advised to devise their strategy and zero in on oil stocks that will be less affected by the change in the normal crude oil price due to the prolonged US-Iran war and closure of the Strait of Hormuz.
According to stock market investors, stock investors need to shift focus from oil marketing companies to oil exploration companies, because Oil Exploration and Production (E&P) companies are getting the benefit of the rise in the crude oil and diesel oil price gap in the international market due to the disruption in crude oil supply post-US-Iran war.
Crude oil price | New normal and its impact on oil companies
Decoding the new crude oil price normal and its impact on the oil companies in India, Seema Srivastava, Senior Research Analyst at SMC Global Securities, said, “Crude oil prices have been sustaining at elevated levels, and there seems to be no solution to the Strait of Hormuz disruption. In such a scenario, $110 per barrel has become the new normal for international crude oil prices, and investors need to devise their investment plans keeping this factor in mind until there is an end to the US-Iran war and a solution to the Strait of Hormuz re-opening.”
Highlighting the investment plan regarding oil stocks in the wake of the new normal of crude oil prices, Avinash Gorakshkar, Founder of Avinash Mentor Research, said, “One should shift focus from oil marketing companies to oil exploration companies (E&P), as they are reaping the benefit of rise in the price gap between the crude oil price and diesel prices in the international market after the outbreak of the US-Iran war.”
Widening gap in between crude oil price and diesel price
Gorakshkar said that the crude oil price was at $70 per barrel when the US-Iran war began, and the diesel price was at $108 per barrel. Now, the diesel price is oscillating around $200 per barrel, and the crude oil price is oscillating around $115 per barrel. So, the gap between the crude oil price and the diesel price has widened from $36 per barrel to $85 per barrel, and this is the catch.
“The widening gap between the crude oil price and the diesel oil price is enabling the E&P companies to pare the losses incurred due to the rise in the input cost, with $110 per barrel becoming a new normal for crude oil prices,” said Gorakshkar, adding, “One should look at adding OnGC shares in one’s portfolio as it would be least affected by the crude oil price rise, because a rise in crude oil prices leads to higher income from diesel exports for these E&P companies.”
Gorakshkar said Reliance Industries shares can also be a good option for someone looking at oil stocks amid thesoaring Sensex and Nifty 50 indices.
ONGC share price target
Decoding the technical chart of ONGC shares, Sumeet Bagadia, Executive Director at Choice Broking, said, “ONGC shares have strong support at ₹220. Fresh investors and existing shareholders are advised to hold the scrip, maintaining a strict stop-loss at ₹220 for the upside targets of ₹240 and ₹250 in the near term.”
Disclaimer: This story is for educational and informational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified financial experts before making any investment decisions.
