SUMMARY
- ONGC and Oil India plunge over 9% intraday as Brent and WTI crude prices fall to multi-year lows.
- Saudi Arabia’s price cuts and OPEC+ production hike fuel fears of oversupply amid Trump’s new tariff shock.
- Analysts warn that unless crude rebounds above $70, upstream oil firms may stay under earnings pressure.
India’s Oil Giants Hit Hard as Crude Collapse Sends Shockwaves Through Dalal Street
The stock market began the week with a jolt as shares of ONGC and Oil India nosedived on April 7, reacting sharply to plunging global crude oil prices. Brent crude slumped nearly 4% to $63.21 a barrel, its lowest level since 2021, while WTI breached the $60 mark for the first time in four years, closing at $59.79. This steep drop follows an 11% weekly decline for Brent amid mounting fears of a global demand slowdown.
At the Bombay Stock Exchange, ONGC tumbled 9.3% intraday to ₹205, while Oil India fell 9.15% to ₹325. Both stocks recovered marginally by the closing bell, but the damage was done. Year-to-date, ONGC is now down over 10%, while Oil India has lost more than 23% in 2025, underscoring investor concerns about their earnings trajectory in a bearish oil price environment.
The dual blow of Saudi Arabia’s pricing aggression and Donald Trump’s renewed tariff war has hit upstream oil stocks hard, just as global investors were hoping for energy market stability.
What has happened to the Centre I do not understand!!?? @narendramodi
— Mohammed Zubair (@zoo_bear) April 7, 2025
They said Crude oil prices have dropped below $60 per barrel to lowest since 2021, yet the govt raises excise duty on petrol and diesel. https://t.co/kI8HTQzrYG pic.twitter.com/055epbMwsh
Why Oil Price Drops Hurt ONGC and Oil India
- ONGC and Oil India earn revenue by selling crude oil; lower prices reduce per-barrel realization.
- Inventory mismatches can trigger valuation losses for refiners and producers.
- Global oversupply and weak demand narrow margins for upstream firms.
The core business model of upstream oil companies like ONGC and Oil India hinges on strong crude prices to sustain profitability. As prices fall, the revenue generated per barrel of oil sold declines sharply. That translates to lower earnings and EBITDA margins, a trend reflected in the selloff.
This is further exacerbated when refined product prices don’t fall in tandem, leading to mismatches in input cost and output value. Additionally, a surprise increase in output by OPEC+ and Saudi Arabia’s $2.3 per barrel price cut for May Arab Light crude to Asia have triggered worries of a global supply glut.
The geopolitical undercurrents—especially the Trump administration’s blanket tariffs, now facing retaliatory duties from China—have added fuel to recession fears, which in turn sap oil demand forecasts.
Global Ripple Effects and Market Sentiment
- Tariff-driven slowdown fears have triggered a flight from commodities.
- Oversupply and weak demand signals risk pushing oil into oversold territory.
- Analysts warn of sustained volatility unless Brent stabilizes near or above $70.
Market participants are now pricing in an extended period of low crude prices, especially as macroeconomic indicators turn more fragile. The risk premium that kept oil prices afloat amid Middle East tensions is unwinding, and speculative interest is rapidly pulling back.
Brokerages like Nomura and UBS have advised caution on upstream energy stocks. Unless a technical rebound pushes Brent back above $70, companies like ONGC and Oil India are expected to see limited earnings recovery. Their limited pricing power, combined with exposure to government-linked subsidies and fuel price caps, makes them especially vulnerable.
Domestic Outlook: Subsidy Shadows and Fiscal Math
- Lower crude helps India’s import bill but hurts state-owned producers.
- Government may delay fuel pricing reforms or resist passing on benefits, impacting margins.
- ONGC’s FY25 outlook could face downward revisions if oil stays below $65.
While falling crude is generally good news for India’s fiscal health—it narrows the current account deficit and keeps inflation in check—the same cannot be said for the state-owned oil producers. These firms bear a disproportionate burden when the government seeks to shield consumers from oil price shocks.
In such cases, ONGC and Oil India are often asked to absorb part of the subsidy costs, affecting their profitability and cash flows. Analysts now expect possible downward revisions to FY25 earnings estimates, particularly if crude prices stay subdued and export revenues dip.
What Could Reverse the Trend?
While the outlook remains grim in the near term, a few developments could lift sentiment for ONGC and Oil India:
- Brent crude reclaiming the $70–75 band, possibly via Middle East disruptions or tighter OPEC+ compliance.
- Demand revival from China or India, easing oversupply fears.
- Dollar weakness, making crude more attractive for global buyers.
Until then, investors may continue to treat upstream energy stocks with caution, especially amid global economic fragility, currency volatility, and election-year uncertainty in major economies like the US and India.
