Oil India, ONGC, others fall up to 5% as oil falls on larger-than-expected OPEC+ output hike

Shares of oil refineries tumbled on July 7 as oil prices dropped sharply following a larger-than-expected increase in oil production for August by the OPEC+ alliance.

The Organization of the Petroleum Exporting Countries and their allies, also known as OPEC+, had announced over the weekend its plan to hike production by 5.48 lakh barrels per day (bpd) in August, which is significantly higher than the 4.11 lakh bpd monthly increase in output approved by the organization for May, June and July.

Following the announcement, oil prices tumbled with Brent crude futures down 0.73 percent to $67.80 per barrel, while US West Texas Intermediate crude dropped 0.72 percent to hover around $66.02 per barrel, as seen in the morning, but rebounded later in the day.

OPEC+ said the sharp rise in output was driven by 'steady global economic outlook and current healthy market fundamentals'. Goldman Sachs analysts now expect OPEC+ to announce a bigger and final 5.5 lakh bpd increase for September at its next meeting scheduled for August 3.

The fall in oil prices will likely bear an impact on the margins of the oil refiners, which may have led to a downturn in their stock prices.

Heavyweights Oil India and Oil & Natural Gas Corporation (ONGC) shares closed over 1 percent lower each at Rs 440 apiece and Rs 241 apiece, respectively. Chennai Petroleum Corporation shares dropped over 4 percent to end the session at Rs 739 apiece, while Manali Petrochemicals shares plunged over 5 percent. Mangalore Refinery and Petrochemicals shares also fell over 3 percent.

Analysts noted that the oil market was tight, suggesting that it can absorb additional supply.

"ONGC/Oil India’s total crude output is estimated to decline 0.7%/grow 1% YoY, whereas gas is forecasted to fall 1%/grow 3%. The scraping of windfall levy implies market-linked oil realizations for Q1FY26. Despite lower output, we estimate EBITDA will increase 17% QoQ for ONGC on lower expenditure profile; OIL is likely to see an 8% uptick due to lower opex and statutory levies. We estimate ONGC/OIL’s RPAT at Rs80.6/12.3bn during Q1FY26. We expect sequential improvement in NRL earnings on better GRMs and excise duty hikes," said Emkay Global Financial Services.

(With inputs from Reuters)Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.