Shares of oil exploration companies ONGC and Oil India gained in trade on Monday, June 16, amid escalating geopolitical tensions between Israel and Iran, which triggered a sharp spike in crude oil prices. Further, Union Minister for Petroleum and Natural Gas Hardeep Singh Puri’s recent remarks indicating that India may be on the verge of discovering a major crude oil reserve in the Andaman Sea, added more fuel to the rally.
While speaking to The New Indian Express, the Petroleum Minister said, “I believe it is only a matter of time before we discover a major Guyana-like reserve in the Andaman Sea. Our exploration is ongoing.”
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India currently imports nearly 85-86 per cent of its crude oil and is the world’s third largest importer after the US and China. If oil reserves are found in the Anadaman Sea, it could help ease the country’s burden of oil import costs.
ONGC, Oil India Shares Rally
Shares of ONGC surged as much as 2.3 per cent to hit an intraday high of Rs 257.30 per share on the NSE. Similarly, Oil India too climbed up to 2.87 per cent to touch an intraday high of Rs 491.50 apiece on the NSE.
For both the oil stocks, this is the seventh consecutive session of gains.
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The Nifty Oil & Gas index, where ONGC and Oil India constitute a cumulative weight of 18.1 per cent, rose as much as 0.72 per cent in early trade.
Israel-Iran Conflict
Israel and Iran have been at war since June 13, when Israel launched precision airstrikes on Iran's nuclear sites in an attempt to limit the country's nuclear efforts. Iran retaliated with waves of ballistic missile attacks, targeting Israel's cities and military sites.
The escalation is a critical juncture in a decades-long standoff between the two countries.
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This development drove the Brent Crude Oil Futures over 7 per cent on Friday, June 13. However, On Monday, June 16, it has eased by around 0.5 per cent to trade around $73.85 per barrel.
Rising crude oil prices increase the cost of imports, putting pressure on the economy and widening the trade deficit. In such scenarios, domestic oil exploration companies become more attractive, as they benefit from higher crude prices and help reduce reliance on costly imports.
