Stock Picks: Oil and Natural Gas Corporation (ONGC) share price has seen handsome gains of 94% in a year while Oil India Ltd share price having risen 263% having given Multibagger returns to the investors.
The investor and analyst confidence on earnings growth of these upstream oil and gas producers remains strong, leading to gains for Oil India share price and ONGC share price.
Brent Crude prices that had dipped below $80 a dollar in first half of June for short period however have sustained above $80 a barrel thereafter. The same same is adding to investor sentiments.
Brent is likely to sustain above $80 a barrel feel analysts. The demand supply dynamics is expected to support the Brent crude prices and that may also be positive for investor sentiments towards Oil India share price and ONGC share price.
The rise in Brent crude price to close to $ 85 a barrel in last couple of weeks as OPEC (Organization of the Petroleum Exporting Countries) an their allies continue with voluntary cuts and have not given any indications towards easing of voluntary cuts. Further the geopolitical uncertainty in the Middle East is also supporting the upside.
On the demand side while, China demand remains soft, however International Energy Agency or IEA has maintained its Global demand growth forecast, point analysts.
Analyst at JM Financial say that IEA expects global oil supply growth for Calendar Year 2024 to be limited at only 0.8mmbpd (million barrels per day) due to OPEC+ output cuts, implying a deficit of ~0.2mmbpd. They believe the strong pricing power of OPEC+ will continue to support Brent at ~USD 80/bbl, which is the fiscal break-even crude price for Saudi Arabia. This as per JM Financial analysts is a sweet spot for ONGC and Oil India and they say that current market price for ONGC , Oil India is discounting net crude realisations at $70 a barrel
Additionally a strong 4-6% dividend yield, firm production growth outlook over next 1-3 years is positive as JM Financial has given Buy ratings on ONGC and Oil India. Oil India is also likely to benefit from Numaligarh Refinery capacity expansions.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions
