A sustained recovery in crude prices holds the key for ONGC
Oil & Natural Gas Corp. Ltd (ONGC) has been seeing declining profits lately. But rebounding oil prices have provided a ray of hope. The positive news flow on vaccine-related developments has meant that crude prices gained momentum. Since ONGC’s earnings are directly linked to crude prices, its shares had gained about 21% in November.
The outbreak of covid had led to a sharp fall in consumption of petroleum products globally, affecting the demand and prices of crude oil. Brent lost almost 44% during January-October. As the leading oil producer in India, ONGC too felt its impact, with its share price almost halving during the period.
The rise in crude prices can boost ONGC’s realizations and profits. ONGC saw a major impact during the June quarter, with per-barrel oil realizations plummeting to $28.7 compared to $49 in the March quarter (at a standalone level).
