Reliance Industries, ONGC shares in focus as oil jumps 8% near $100. Will prices hit $200?

Shares of Reliance Industries, ONGC, Oil India and other upstream oil companies are likely to be in focus heading into trade on Thursday after oil prices surged more than 7%, as traders remained unconvinced that emergency stock releases would be enough to offset the severe supply shock caused by the ongoing war in the Middle East.

A rise in crude prices is a positive development for upstream oil and gas companies (producers like RIL, ONGC, Oil India). Higher prices directly increase their revenue per barrel, which could possibly lift profit margins, and can lead to increased capital expenditure on exploration.

U.S. benchmark West Texas Intermediate rose 7.5% to $93.8 per barrel, while global benchmark Brent gained 7.74% to $99.1 per barrel. The sharp move came despite the International Energy Agency (IEA) announcing the largest coordinated release of emergency crude reserves in its history.


The price rise comes despite the IEA saying on Wednesday that its 32 member countries would collectively release 400 million barrels of oil from strategic reserves, marking the biggest coordinated drawdown since the agency was formed after the 1973 oil embargo. The United States said it would contribute 172 million barrels from its Strategic Petroleum Reserve. Energy Secretary Chris Wright said shipments could begin as early as next week and may take about 120 days to complete.

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Will prices hit $200?

Iran warned that global oil prices could climb to $200 per barrel after its forces struck merchant ships on Wednesday. This comes just a week after Qatar’s energy minister told the Financial Times he expects all Gulf energy producers to shut down exports within weeks, a move he said could drive oil to $150 a barrel, according to an interview published on Friday.

The Strait of Hormuz remains effectively shut for regular traffic after several tankers were bombed in the area. More than 20% of the world’s oil supply passes through the Strait of Hormuz, which connects the Persian Gulf with the Gulf of Oman and the Arabian Sea.

Further, two oil tankers have been attacked in Iraqi waters, according to the country’s state oil marketer, prompting authorities to suspend operations at the nation’s oil ports.

U.S. President Donald Trump, who has not committed to a timeline for military operations, said on Wednesday that he was not yet ready to call an end to the war.

Uncertainty over how quickly the additional oil will reach the market is also weighing on sentiment. While the IEA’s move represents an unprecedented intervention, the agency did not specify the pace at which individual countries will release their reserves or how the oil will be distributed.

Concerns over a prolonged conflict are also overshadowing the IEA’s move. Iran has told regional intermediaries that any ceasefire would require the US to guarantee that neither it nor Israel will carry out future attacks on the country, recognise Iran’s rights, and fund reparations for the damage caused during the war. However, Bloomberg reported that Washington is unlikely to accept these conditions.

The conflict, triggered by joint U.S. and Israeli airstrikes nearly two weeks ago, has killed around 2,000 people so far, most of them in Iran and Lebanon. The fighting has since spilled into Lebanon and disrupted global energy markets and transport routes.

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