MUMBAI: Shares of state-owned exploration companies Oil & Natural Gas Corporation (ONGC) and Oil India surged up to 2.8% on Friday, February 20, as global crude oil prices climbed to their highest level in six months amid escalating tensions between the United States and Iran [citation:1][citation:3].
- ONGC: Hit 52-week high of ₹280.80, up 2.8% on BSE; rallied 6% in two trading days [citation:1]
- Oil India: Touched intraday high of ₹486.00, gaining 2.7% [citation:2]
- Brent crude: Settled at $71.66 on Thursday, up 1.9%; highest since July 31, 2025 [citation:3][citation:5]
- WTI crude: Rose 1.9% to $66.43, highest since August 1, 2025 [citation:3]
- OMC stocks: HPCL, BPCL, IOC declined 1-2% on margin concerns [citation:4][citation:7]
- US crude inventories: Dropped 9 million barrels, largest fall in 5 months [citation:1][citation:3]
Why crude oil prices are soaring
1. US-Iran tensions: 10-15 day deadline
US President Donald Trump warned Iran to reach a nuclear deal within 10-15 days or face "bad things" happening [citation:3][citation:8]. Iran and Russia have conducted joint naval exercises, and the Strait of Hormuz—through which 20-31% of global seaborne crude passes—was temporarily closed for drills [citation:3][citation:7]. "Oil prices got a boost from geopolitical tensions and the worry that the US is going to strike Iran," said Andrew Lipow, president of Lipow Oil Associates [citation:3].
2. Sharp drop in US crude inventories
US crude stocks fell by 9 million barrels last week, contrary to expectations of a 2.1 million barrel build [citation:1][citation:3]. Refining utilization and exports climbed, signaling strong demand [citation:3]. This marked the largest inventory drop in five months [citation:1].
3. Saudi exports fall to multi-month low
Crude oil exports from Saudi Arabia, the world's largest oil exporter, fell to 6.988 million barrels per day in December—the lowest since September 2025 [citation:3][citation:8].
Why upstream companies benefit
ONGC, in a stock exchange filing on January 28, attributed the rise in its share price directly to the increase in global crude prices [citation:1]. As an exploration and production (E&P) company, ONGC's realizations improve when crude prices rise, directly boosting revenues and profitability [citation:10].
In the past one month, ONGC has surged 16%, sharply outperforming the Nifty 50's 0.87% rise [citation:1]. The stock surpassed its previous high of ₹280.30 touched on February 12 [citation:1].
Oil India also scales peak
Oil India, another state-owned upstream company, touched an intraday high of ₹486.00, gaining 2.7% [citation:2]. The stock has been on an upward trajectory tracking crude prices and positive brokerage commentary [citation:6].
OMC stocks: The other side of the rally
While upstream companies gained, oil marketing companies (OMCs) faced selling pressure. HPCL fell 2% to ₹427.05, BPCL dropped 1% to ₹362.40, and IOC slipped 1% to ₹172.40 [citation:4]. Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, explained: "Oil refiners made big gains in Q3 on falling/low crude prices. Now, with spiking crude, thanks to the US-Iran standoff, the situation has reversed. The margins of oil refiners will be impacted. The beneficiaries will be the upstream companies like ONGC and Oil India" [citation:4].
Brokerage outlook: ONGC
| Brokerage | Rating | Target Price | Key comments |
|---|---|---|---|
| ICICI Securities | BUY | ₹332 | Higher conviction due to attractive valuations, production growth visibility |
| Emkay Global | ADD | ₹300 | Revised target from ₹280; expects KG basin ramp-up |
Source: Brokerage reports [citation:1]
Production outlook supports momentum
ONGC's management guided to FY27 crude production of 21 million tonnes and gas production of 21.5 billion cubic meters [citation:1]. Key projects like KG-98/2 are nearing completion, with gas ramp-up expected from Q1FY27. The Daman project is also close to monetization, adding 4-5 mmscmd peak gas [citation:1].
Analysts at ICICI Securities note that with the KG basin expected to reach ~8 mmscmd by FY27, the share of new well gas could increase to over 35% in 3-4 years, improving gas contribution even as oil realisations moderate [citation:1].
Global context: Strait of Hormuz in focus
One of the biggest risks being closely watched is the Strait of Hormuz, a narrow shipping route through which nearly 13 million barrels per day pass—accounting for about 31% of all seaborne crude oil globally [citation:7]. Any escalation could prompt Iran to restrict traffic, tightening supply and pushing prices even higher [citation:7].
Markets are now factoring in a possible "war premium" of $10-$12 per barrel, according to analysts [citation:7].
Key takeaways: oil surge & stock impact
- Crude at 6-month high: Brent settled at $71.66, WTI at $66.43 on February 19 [citation:3]
- ONGC hits 52-week high: Stock gained 2.8% to ₹280.80, up 6% in two days [citation:1]
- Oil India up 2.7%: Touched ₹486.00 intraday [citation:2]
- US-Iran tensions: Trump sets 10-15 day deadline; Strait of Hormuz drills escalate fears [citation:3][citation:8]
- OMCs decline: HPCL, BPCL, IOC fall 1-2% on margin concerns [citation:4]
- US inventories: 9 million barrel drop, largest in 5 months [citation:1]
Expert view: "Volatile trend likely"
Dr. VK Vijayakumar of Geojit Investments advises caution: "The trend will remain volatile since the West Asian situation can change quickly. Crude will decline sharply in the event of a deal between Iran and the US" [citation:4]. He suggests investors use the current weakness in other sectors to buy fairly valued high-quality stocks [citation:9].
For upstream companies, the near-term outlook remains tied to geopolitical developments. Any further escalation could drive crude toward $75-80 levels, providing additional upside for ONGC and Oil India. Conversely, a diplomatic breakthrough could trigger profit booking [citation:4].
Disclaimer: This report is based on provisional closing data. Crude oil markets are highly volatile due to geopolitical factors. Please consult your financial advisor before making investment decisions.