Shares of ONGC declined to the day’s low of Rs 309.2, with a fall of 4.2% while Chennai Petroleum Corporation shares dropped 5% to a low of Rs 933.3.
The shares of GAIL and Oil India also witnessed a decline of up to 2%.
Crude oil prices continued to slide on Wednesday, with US crude futures falling over 0.5%, following a more than 4% drop on Tuesday. This decline was driven by signs of a potential resolution to a dispute affecting Libyan crude production and exports. Brent crude also experienced a sharp 4.9% drop on Tuesday and was down an additional 0.6% on Wednesday.
The fall in oil stocks aligns with broader market sentiment, with headline indices Nifty and Sensex trading around 0.5% lower at 11:40 am. The drop in crude oil prices negatively impacts oil drilling stocks like ONGC and Oil India, squeezing their profit margins.Also Read: Investors lose Rs 3 lakh cr as Sensex slumps 500 pts. Top 4 factors behind the selloff
Global brokerage Emkay stated, “Concerns around oil demand are likely to dominate the narrative, eventually pulling prices towards the $70 level. The slowdown in demand, particularly from non-OECD countries like China, where oil consumption has been shrinking since early 2024, presents significant headwinds.”
Emkay also noted that OPEC’s ability to enforce supply cuts has diminished as its share of global oil production has dropped from nearly 60% in 2012 to 49% in H1CY25. “It’s rational to assume OPEC may shift to defending market share, potentially leading to further price declines,” Emkay added.
Additionally, expectations of increased OPEC+ production starting in October, intended to offset the decline in Libyan output, add pressure to oil prices. According to media reports, OPEC+ plans to boost oil output by 180,000 barrels per day in October, as part of a strategy to gradually reverse recent production cuts while maintaining some reductions until the end of 2025.
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