Why ONGC Share Price is Rising

In a remarkable turnaround on Monday (29 January 2024), benchmark equity indices Sensex and Nifty staged a robust rebound, registering a significant surge of nearly 2%.

The 30-share BSE Sensex witnessed a substantial leap of 1,240.9 points or 1.8%, closing at 71,941.57, while the Nifty climbed 385 points or 1.8% to reach 21,737.6.

Among the standout performers in this upward market movement, the Nifty Oil & Gas sector experienced notable gains, posting an impressive increase of nearly 4%.

Notably, within this sector, ONGC emerged as a top performer, with its shares soaring by a remarkable 8%, reaching a 52-week high.

Here's what is driving the upswing.

#1 Rising Crude Oil Prices

Oil-linked stocks such as Oil India Ltd and Oil and Natural Gas Corp surged 8% on Monday due to a significant rise in oil prices amid escalating tensions in the Middle East.

Crude oil prices surged to settle at eight-week highs amid escalating tensions in the Middle East. The Gulf of Aden witnessed a Houthi anti-ship missile damaging an oil tanker, further intensifying regional tensions.

Brent prices soared past US$ 83 a barrel in response to these developments. Crude oil prices received a boost from the International Energy Agency's revised global demand outlook for 2024 and 2025.

Adding to this, US production dipped to five-month lows last week due to harsh weather conditions in North Dakota, further supporting oil prices.

Following the update, the 15-share index jumped 4%.

#2 Green Energy Subsidiary

Oil and Natural Gas Corporation (ONGC), on 23 January 2024, received approval from the Petroleum and Natural Gas Ministry for the formation of a subsidiary company for green energy and gas business.

The public sector firm has asserted the approval of the Ministry of Petroleum and Natural Gas for the formation of a wholly-owned subsidiary company for the mentioned green projects and subsequently entertaining to bring fossil substitutions.

The name of the new subsidiary is claimed to be ONGC Green Limited, which is subject to seeking the approval of the Ministry of Corporate Affairs.

The company has also stated that the board has accorded in-principle approval for the formation of a joint venture company either directly or through an affiliation with NTPC Green Energy Ltd, a wholly-owned subsidiary of NTPC.

#3 Commences Offshore Rig Expansion

Apart from that, ONGC has kicked off the process of chartering up to four offshore rigs, marking a significant step in its ambitious domestic fleet expansion drive.

These rigs, likely destined for deployment off the western coast, will bolster ONGC's existing fleet of over 35 (including charters) and play a crucial role in exploring new oil and gas blocks and furthering ongoing brownfield developments in the region.

This proactive move comes amid a tightening global rig market and underscores ONGC's commitment to securing vital equipment for its exploration pursuits without facing potential delays or price hikes.

Strong Growth Prospects

Growth in global gas demand is set to pick up this year due to colder winter temperatures and easing prices, with emerging economies leading the increase in consumption.

However geopolitical risks and supply-side concerns could trigger renewed price volatility, according to the International Energy Agency.

Global gas demand is forecast to grow by 2.5%, or 100 billion cubic metres, in 2024. Expected colder winter weather in 2024, compared with the unusually mild temperatures experienced in 2023, is likely to increase demand for space heating in residential and commercial sectors.

Natural gas prices have fallen sharply following the record highs seen in 2022, which is also supporting the recovery in gas demand.

While prices remain well above historical averages, demand in price-sensitive industrial sectors will see a return to growth.

In power generation, gas use is forecast to increase only marginally, as higher gas burn in the Asia-Pacific region, North America and the Middle East is forecast to be partly offset by reduced demand in Europe.

What Next?

Last year, ONGC announced its comprehensive strategy for using energy efficiently.

As per its announcements, phase 1 will focus on investing Rs 1 trillion (tn) out of the entire investment amount into renewable energy projects, offshore wind energy projects, and the production of green ammonia.

This is not the first investment in sustainable development by ONGC. There are a lot of projects in this space that are already running successfully and a lot more are in the pipeline.

They are also working on building a green ammonia facility, which will have a 1 MMTPA capacity.

It is investing to achieve its onshore wind energy target of 2 GW by 2030. This is one of the highly advanced tech-led projects in the renewable energy space.

The company is also aiming at multiplying its oil and gas production by 3x within 2040, including production from its overseas plants.

How Shares of ONG have Performed Recently

The ONGC stock rose around 72% in the past one year. Over a month, the share price has gained by 21%.

ONGC share price touched its 52-week high price of Rs 263.3 on 30 January 2024. Its 52-week low was Rs 140.1 touched on 3 February 2023.

The company is currently trading at a PB (price to book value) multiple of 1.1 times.

About ONGC

ONGC is the biggest publicly traded oil and gas production and exploration company in India.

The company produces 70% of India's crude oil. This is almost equivalent to 57% of the overall demand in the country.

It also produces 84% of India's natural gas.

ONGC is under the ownership of the Ministry of Petroleum and Natural Gas and the Government of India.

In 26 sedimentary basins in India, it is engaged in hydrocarbon exploration and exploitation. It owns and operates over 11,000 km of pipelines in the country.

To know more about ONGC, check out ONGC's financial factsheet and its latest quarterly results.

You can also compare ONGC with its peers:

ONGC vs Oil India

ONGC vs Hindustan Oil Exploration

ONGC vs Asian Energy Services

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

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