ONGC Leads Decline in Oil Stocks After Gas Report: Mumbai MoverRakteem Katakey
Oil & Natural Gas Corp., India’s biggest energy explorer, led stocks of the nation’s oil companies lower after crude prices surged and a newspaper report said the government is considering raising gas prices only for the volume produced after March 2014.
ONGC slumped as much as 7.8 percent and traded down 6.4 percent to 414.45 rupees as of 1:39 p.m. in Mumbai. The New Delhi-based explorer is the biggest loser in the MSCI Emerging Markets Index today and is poised for its steepest decline since November 2008. The S&P BSE Oil & Gas Index declined as much as 3.9 percent, its biggest drop in 10 months.
India’s oil ministry is considering allowing a higher price for natural gas that is produced after March 2014, while the rest would be sold at the current $4.2 a unit, the Financial Express reported today, citing a note prepared for the Cabinet. Brent crude, a benchmark price for India, in London trading has increased 4.8 percent this month, the most since August, as fighting between government forces and Sunni rebels intensifies in Iraq.
“The gas pricing proposal, if implemented, will affect ONGC the most because it is the biggest producer in India now,” Gagan Dixit, a Mumbai-based analyst with Quant Broking Pvt., said by phone. “Surging oil prices will add to the burden as ONGC may be forced to give more discounts on their crude oil as subsidy. The shares are showing that pain.”
ONGC and Oil India Ltd., both controlled by the federal government, give discounts on the crude oil they sell to state-run refiners to partly compensate them for selling fuels below cost. Higher oil prices increase the refiners’ revenue losses, forcing the explorers to give steeper discounts.
Oil India fell as much as 5.6 percent to 562.20 rupees and Reliance Industries Ltd., operator of the biggest Indian gas field, dropped 3.3 percent. Indian Oil Corp., the nation’s biggest state-run refiner, declined 3.6 percent, Hindustan Petroleum Corp. 4.4 percent and Bharat Petroleum Corp. 4.7 percent.