Oil prices took a significant hit on Thursday, marking their steepest percentage loss since 2022, following a surprise decision by OPEC+ to increase oil output. As a result, shares of Oil and Natural Gas Corporation (ONGC) and Oil India Limited (OIL) also experienced substantial declines on the Bombay Stock Exchange (BSE) on Friday, April 4.
Oil Price Decline and OPEC+ Decision
Brent crude futures tumbled by 6.42%, settling at $70.14 per barrel, down $4.81. Similarly, US West Texas Intermediate (WTI) crude futures fell by 6.64%, finishing at $66.95 per barrel, according to Reuters. The sharp drop in oil prices followed an announcement that OPEC+—a coalition of oil-producing countries including Saudi Arabia and Russia—had agreed to increase oil production by 411,000 barrels per day starting in May. This unexpected decision came the day after US President Donald Trump unveiled new import tariffs, further exacerbating concerns about global economic stability.
Impact on Oil and Gas Companies
The decision by OPEC+ to ramp up oil output had a direct negative impact on upstream oil companies like ONGC and Oil India, which are heavily reliant on oil prices for their revenue. As these companies are involved in the exploration, development, and production of oil and gas, any dip in oil prices significantly affects their profitability. With fixed production costs and fluctuating market prices, upstream companies face the risk of incurring losses if the cost of producing oil exceeds its market value.
Shares of ONGC, one of India’s largest oil companies, slipped by as much as 7.25%, falling to ₹225.70 apiece on the BSE. Similarly, Oil India’s stock dropped 6.7%, reaching ₹360 per share. Both companies saw heavy selling pressure in the market due to the unfavorable conditions brought on by falling oil prices.
Continued Pressure on Oil Stocks
As of the latest data, ONGC was trading at ₹228.10, marking a 6.27% decline, while Oil India shares were down 5.84% at ₹363.4 apiece. The market response suggests that investors are concerned about the potential for prolonged weakness in oil prices, which could continue to weigh on the profitability of upstream oil companies.
