ONGC and Oil India shares down over 9% as crude oil prices continue to fall

Shares of state-run oil exporters Oil and Natural Gas Corporation (ONGC)and Oil India Ltd were down over 8% on Monday, April 7, as crude oil prices continued to fall sharply over the last three days.

Global oil prices sink

Oil prices sank

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.

Uncertain Outlook

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 session 7.07% lower at ₹226.1 apiece. ONGC shares declined 9.3% to hit an intraday low of ₹205 apiece. The stock was down 6.3% at 9.25 am. It has declined 10.6% this year, so far.

Oil India shares ended the previous session 6.77% lower at ₹359.9 apiece.Oil India shares declined 9.15% to hit an intraday low of ₹325 apiece. The stock was down 5.97% at 336.4 apiece. it has declined 23.18% this year, so far.

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