Global prices sink
at the beginning of the week as Saudi Arabia slashed its flagship crude price by the most in over two years and the escalating trade war spurred uncertainties regarding global recession and weaker demand. Brent fell almost 4% to a four-year low of $63.21 a barrel, after falling 11% last week. Meanwhile, the West Texas Intermediate was at $59.79 a barrel.
Global uncertainties
State producer Saudi Aramco will lower the Arab Light crude to its biggest buyers in Asia by $2.3 a barrel for May. This comes just a few days after the OPEC+ alliance announced an unexpectedly large output hike.
US President Donald Trump’s top officials have dismissed fears of inflation and recession post the recent tariffs on all imports to the nation. Among the countries, pushing back, China, which is the largest crude buyer, has announced retaliatory tariffs against the US as well.
Oil has been dropped sharply in recent sessions post the tariffs woes. Crude’s losses were also exacerbated by the unexpected OPEC+ alliance move to increase production by more than expected.
Trump has also pressed the OPEC+ to “cut the price of oil”, which he said is required to reduce inflation and increase pressure on Russia to help end the Ukraine war.
Why is global oil prices negative for ONGC and Oil India
Oil prices falling are negative for Oil India and ONGC as it adversely impacts their margin. The price of the products refined by them may not fall as quickly or in proportion to the fall seen in crude oil prices and hence, refineries which have held inventories bought at higher prices may face inventory losses.
The combination of risks to crude demand, with additional output, has revived concerns regarding a global surplus.
How ONGC and Oil India shares are performing ONGC shares ended the previous ession 7.07% lower at ₹226.1 apiece. The stock has declined nearly 22% in the last six months and 4.58% this year, so far.
Oil India shares ended the previous session 6.77% lower at ₹359.9 apiece. The stock has declined 34.25% in the last six months and 17.66% this year, so far.
Also Read: IGL hikes CNG prices by ₹1-3/kg; Delhi sees first increase in 9 months