Why did oil stocks like ONGC, IOCL, BPCL and GAIL rise so sharply on Tuesday?

On Tuesday, most of the oil stocks surged but this trend has been visible for the last few days consistently. On Tuesday, ONGC gained almost 8% with solid gains coming from GAIL and other OMCs like Indian Oil and Bharat Petroleum. The only exception was Petronet LNG, which fell as it is likely to get hit by higher crude prices. In fact, even the city gas distribution companies or CGDs came under pressure in the last few days.

But, the oil rally has been going on for much longer. There were broadly two triggers for this solid spike in oil and gas stocks. The first trigger was pertaining to the gas price hike announced by the Indian government. Last week ,the government had announced a sharp 62% hike in natural gas prices for the second half of FY22 from a level of $1.79 per MMBtu to $2.90 per MMBtu.

The second trigger pertained to the sharp spike in the price of Brent Crude and WTI crude . Both these oil baskets have scaled 2014 levels, the point from where the correction in oil prices had first started. In short, oil is at the highest level in the last 7 years. With Brent at $83/bbl and WTI crude at $81/bbl and the OPEC meeting likely to hike output slower than expected, the price of oil promises better realizations to oil companies in the days to come.