Investors advised to shift focus to oil exploration companies as crude prices rise
Experts suggest adding ONGC shares to portfolios as the gap between crude oil and diesel prices widens.
According to a report by Mint, stock investors are advised to shift their focus from oil marketing companies to oil exploration and production (E&P) companies as crude oil prices sustain at elevated levels. This comes as $110 per barrel becomes the new normal for the commodity on the MCX due to the US-Iran war and the closure of the Strait of Hormuz.
Seema Srivastava, Senior Research Analyst at SMC Global Securities, said that crude oil prices are sustaining at elevated levels with no solution currently in sight for the Strait of Hormuz disruption. She noted that investors need to devise plans keeping the $110 per barrel price in mind until the US-Iran war ends.
Avinash Gorakshkar, Founder of Avinash Mentor Research, said that E&P companies are benefiting from the rising price gap between crude oil and diesel oil in the international market. He stated that when the US-Iran war began, the crude oil price was $70 per barrel and diesel was $108 per barrel, but now crude is around $115 and diesel is oscillating around $200 per barrel.
Gorakshkar said the gap has widened from $36 per barrel to $85 per barrel, allowing E&P companies to pare losses from rising input costs. He suggested adding ONGC shares to portfolios as they may be least affected by the rise, while also noting Reliance Industries shares as a good option.
Sumeet Bagadia, Executive Director at Choice Broking, said ONGC shares have strong support at ₹220. He advised fresh investors and existing shareholders to hold the scrip with a strict stop-loss at ₹220 for near-term upside targets of ₹240 and ₹250.