Attractive valuations largely limit downside risks for upstream players

Despite weak crude prices and policy risks, ONGC and Oil India trade at steep discounts to global peers, with growth projects and NWG premiumisation offering upside potential

There is a clear downtrend in the global oil and gas (O&G) market as demand is slow while supply is at a surplus. In August, Brent crude settled at $67.4 per barrel (bbl), down 3 per cent month-on-month (M-o-M) and a decline of 14.6 per cent year-on-year (Y-o-Y). Some analysts are estimating a drop below the $60 mark given Chinese industrial slowdown, OPEC plus signalling higher supply from October, and elevated inventory levels.

 

Moreover, there may have been a structural shift post-pandemic in demand for oil since work-from-home has cut transportation needs alongside increasing electric vehicle or EV penetration. 

 

India’s