Why Oil India Share Price is Rising

Buckle up for a ride on the oil and gas rollercoaster. The oil and gas index is on a tear in 2024, soaring a staggering 36.9% year-to-date (YTD).

Just this past week, it accelerated further with a 5.2% jump. What is the driving force behind this surge? A simple answer is rising global oil prices.

This is how the BSE Oil and Gas Index performed in the last year.

One of the notable beneficiaries of this upswing is Oil India.

The company has already delivered impressive returns to investors in 2024, with its share price surging a multibagger 144.8%. But hold on, there's more.

Oil India share price seems to be riding a new wave, experiencing a remarkable 23% rally in just the past five days. So, what's propelling this latest surge?

Let's delve deeper and explore the potential reasons behind Oil India's recent share price acceleration.

#1 Expected Rise in Oil Exploration and Production Activity

The bullish sentiment towards oil and gas sector received a new boost after, Union Minister Hardeep Singh Puri tweeted,

• "Did you know the full potential of India's 26 sedimentary basins still remain untapped? We have over 651.8 million metric tonnes of crude oil and 1,138.6 billion cubic meters of natural gas waiting to be explored. Under leadership of PM Modi, we are committed to making India the most attractive investment destination for E&P"

At the recently held Urja Varta conference, the minister emphasised the critical role of the exploration and production (E&P) sector in achieving energy self-sufficiency and sustaining economic growth. He pointed out that E&P presents investment opportunities worth US$ 100 billion (bn) by 2030.

India's E&P potential remains largely untapped. Despite having abundant geological resources, the country heavily relies on oil imports.

Indian sedimentary basins contain about 651.8 million tonnes (MT) of crude oil and 1,138.6 bn cubic meters of natural gas. However, only 10% of the sedimentary basin area is currently under exploration. This is expected to increase to 16% by the end of 2024.

He stressed the need to focus on discovering new resources. Currently, India imports over 85% of its crude oil, which is then refined into fuels like petrol and diesel. To reduce this dependency, the government is actively promoting investments in the E&P sector.

To boost investments, the government has implemented major reforms through the Ministry of Petroleum and Natural Gas (MoPNG). These reforms are designed to empower stakeholders and contribute to the nation's progress.

One of the key objectives is to increase India's exploration acreage to 1 million (m) square kilometers by 2030. Since its inception in 2015, the Discovered Small Field (DSF) policy has attracted approximately US$ 2 bn in investments and brought in 29 new players to the field.

Opening previously restricted areas, such as the Andamans, has encouraged exploration activities. This has paved the way for significant investments in these regions.

Additionally, he announced the formation of a joint working group (JWG) that includes representatives from private E&P operators, national oil companies, MoPNG, and the DGH. This group will examine issues related to ease of doing business, policy adequacy, and necessary revisions. It will submit its recommendations within eight weeks.

These developments are boosting Oil India's share price. The increased investment opportunities, government reforms, and expansion of exploration activities, create a positive outlook for the company's growth and profitability.

Investors are optimistic about Oil India's potential to capitalise on these opportunities, driving up its share price.

#2 Rising Oil Prices

Oil prices around the globe have been on a continuous rise recently. This upward trend has been driven by various factors, including supply cuts and geopolitical uncertainties.

Brent Crude, a major benchmark for oil prices worldwide, has remained above US$ 80 a barrel after a brief dip below that level in early June. When Brent Crude prices rise or stay high, it usually means oil prices in India will also be higher.

The potential reasons for rising oil prices include supply cuts by the Organization of the Petroleum Exporting Countries (OPEC) and its allies. They have voluntarily reduced the amount of oil they produce, limiting supply and pushing prices up.

This stability and sustained high price of Brent Crude have caused analysts to be confident in the earnings growth of upstream oil and gas producers, like Oil India and ONGC.

Geopolitical uncertainty, particularly in the Middle East, can disrupt supply and drive prices higher. Despite some weak demand from China, the International Energy Agency (IEA) has maintained its forecast for global demand growth. This indicates steady consumption that supports higher prices.

The share price of Oil India is rising due to sustained high Brent Crude prices and positive investor sentiment. No wonder international brokerages are bullish about Oil India.

How Oil India Share Price has Performed Recently

In the past five days, Oil India share price has rallied 23%. In the last month, it is up 34.2%.

In 2024, so far its share price has surged 144.8% and its up 263.2% in the last one year.

The stock touched its 52-week high of Rs 652.2 on 12 July 2024 and a 52-week low of Rs 169.2 on 18 July 2023.

About Oil India

Oil India is an India-based integrated exploration and production company in the upstream sector, which is engaged in providing crude oil and natural gas.

The company's segments include crude oil, natural gas, LPG, pipeline transportation, renewable energy and others.

It owns and operates facilities and equipment to carry out seismic and geodetic work, two-dimensional (2D) and three-dimensional (3D) data acquisition, processing and analysis, drilling, oil and gas field development and production, liquefied petroleum gas (LPG) production, and pipeline transportation.

The company owns and operates an approximately 1,157 km long fully automated crude oil trunk pipeline between Naharkatia-Barauni.

For more details, see the Oil India company fact sheet and quarterly results.

For a sector overview, read our energy sector report.

You can compare Oil India with its peers:

Oil India vs ONGC

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

Happy Investing.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...