Exploration stocks surge as oil prices rally on vaccine hope; ONGC up 4%

Shares of oil exploration & production companies were in focus on Wednesday in an otherwise volatile market as oil prices hit their highest level since March amid news flow related to smooth US presidency transition and encouraging developments on the Covid-19 vaccine front.

The stock of Oil and Natural Gas Corporation (ONGC) gained 6 per cent to hit a high of Rs 80.60, while Oil India was up nearly 4 per cent on the BSE in the intra-day trade. In comparison, the S&P BSE Sensex was down 0.45 per cent at 44,324 points at 11:09 am.

Among the other individual stocks, Alphageo (India) rallied 18 per cent to Rs 244 while Aban Offshore was locked in the upper circuit of 10 per cent at Rs 27.65 on the BSE. Jindal Drilling & Industries, Hindustan Oil Exploration and Selan Exploration Technology were up in the range of 5 per cent to 8 per cent.

According to a Reuters report, oil rose about 4 per cent on Tuesday to touch highs not seen since March as a third promising coronavirus vaccine raised hope for fuel-demand recovery and US President-elect Joe Biden began his transition to the White House.

Brent crude settled at $47.86 a barrel, gaining $1.80, or 3.9 per cent. US West Texas Intermediate crude settled at $44.91 a barrel, rising $1.85, or 4.3 per cent. Both benchmarks ended at their highest close since March 5, the report said. On Wednesday, brent crude extends gains to trade over $48/bbl-mark. CLICK HERE FOR FULL REPORT

"The crude oil prices gained on demand growth optimism over vaccine hopes from the Oxford-AstraZeneca trial results. The speculation ahead of OPEC plus meeting has also kept crude oil prices up as the group may consider for deeper cuts in January 2021. We expect crude oil prices to trade sideways to up for the day with positive global cues," Tapan Patel- Senior Analyst (Commodities), HDFC securities said in a note.

Meanwhile, the refiners are expected to increase their capacity in the coming months as the economy has been unlocking in a phased manner but with most of the Indian states re-imposing curfews and it could act a major detriment for demand of petroleum products, according to CARE Ratings.

However, the rating agency remains cautious about the pace of oil-demand recovery, especially with a resurgence of coronavirus in many European countries and in North American. Most of these countries have also announced a second lockdown in order to control the spread of the virus which is a major detriment for oil demand recovery, it said.