Shares of state-run oil explorers Oil India Ltd and Oil and Natural Gas Corporation Ltd (ONGC) fell up to 8% on Friday, April 4, following a massive drop in crude oil prices overnight.
Both Brent and WTI crude declined nearly 7% on Thursday. While WTI fell towards the $66 per barrel mark, Brent prices dropped to $70 per barrel.
This drop in Brent crude was caused by the Organization of Petroleum Exporting Countries (OPEC+) announcing an unexpected, larger-than-expected production hike. While OPEC+ had planned to raise production by 1.38 million barrels per day in May, they announced a 4.11 million barrel per day hike.
Delegates described this as a deliberate attempt to lower prices to punish members who produce more than their quotas. Adding to the uncertainties were Donald Trump’s tariff announcements and growing fears of a recession in the US.
The fall in oil prices is negative for Oil India and ONGC as it adversely impacts their margins. The price of products refined by them may not fall as quickly or in the same proportion as the fall in crude oil prices and, therefore, refineries that hold inventory bought at higher prices may face inventory losses.
Oil India shares fell 8.1% to hit an intraday low of Rs 354.6 per share. ONGC shares fell 7.85% to hit an intraday low of Rs 224.2 per share.
Oil India and ONGC shares have fallen about 38% and 24%, respectively, in the last six months.
