Oil India, ONGC Shares Tumble up to 6% as Crude Prices Crash After Surprise OPEC+ Output Hike

Shares of state-run oil companies, Oil India Ltd. and Oil and Natural Gas Corporation Ltd. (ONGC), dropped as much as 6% on Friday, April 4, after crude oil prices plummeted overnight. Oil India shares experienced an intraday low of ₹360 per share, closing at ₹386.05, a decrease of 6.7%. Similarly, ONGC shares fell to an intraday low of ₹228.056 per share and ended at ₹243.31, representing a 6.44% drop.

Negative Impact of Falling Oil Prices 

The decrease in oil prices has had harmful effects on Oil India and ONGC as it adversely affects their profit margins. Brent and WTI crude fell sharply overnight, nearly 7%. WTI crude nearly touched $66 per barrel and Brent prices fell to $70 per barrel.

Reason Behind Drop in Crude Oil Price

The main catalyst behind this decline in Brent crude was the announcement of a surprise, much larger than expected, production hike by the Organization of Petroleum Exporting Countries  (OPEC+). Instead of the planned hike of 1.38 million barrels per day in May, OPEC+ declared an increase of 4.11 million barrels per day. This was an intentional attempt to drive down prices to punish members who are producing above their quotas. Donald Trump’s tariff announcements and fears of an impending recession in the United States were among the factors that contributed to market instability.

Effects on Refineries 

It is unlikely that prices of refined products will fall as quickly or as proportionately as crude prices do. Consequently, refineries holding inventories purchased at higher crude oil prices could face inventory losses.

Long-Term View 

Over the last half-year, both Oil India and ONGC shares have fallen sharply by almost 36 percent and 23 percent, respectively.

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