InvestorQ : On Friday, why did the stocks of oil and gas companies like ONGC, IOC and GAIL rally so sharply?
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On Friday, why did the stocks of oil and gas companies like ONGC, IOC and GAIL rally so sharply?

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Deepa Salunkhe answered.
3 months ago
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Most of the oil stocks have rallied up to 10% on Friday as the higher crude prices helped the oil stocks along the way. On Thursday, the Brent crude price crossed $50/bbl for the first time since March 2020 on demand recovery and hopes of COVID-19 vaccine, as well as expected support in the form of constrained supply from the OPEC.

In terms of individual stocks, ONGC rallied 10% after Morgan Stanley upgraded the stock, citing a higher probability of recovery in average selling price and better realizations. The report also pointed to improved outlook on domestic production. In fact, ONGC crossed Rs.100 mark for the first time since Feb-20 this year.

ONGC was not the only one to rally. Meanwhile, Oil India, also gained 10% and ending up with gains of over 27% in one month. Even the gas transporter, GAIL, was up 7% on Friday adding to the rally. OPEC in its last meeting had agreed to increase its output b less than half a million bpd which would not have any material impact in depressing oil prices.

There is also expectation that Joe Biden may go slow on fracking on Federal lands and that would constrain the supply of shale from the US. The move would result in a more stable crude oil prices across the globe. Most brokerages are estimating the crude prices in the range of $50/$60 per bbl in the coming months.

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