Oil India Remains ICICI Securities' Preferred Pick as Oil and Gas Output Set to Rise
Key Takeaways
- •ICICI Securities analyst Probal Sen named Oil India the brokerage's preferred oil and gas pick on expectations that its crude oil and natural gas production will rise.
- •Sen expects crude prices to hold around $90–$95 per barrel in the near term while refining margins remain strong.
- •Oil India, alongside ONGC, is one of India's two large state-owned upstream explorers, and its realisations are linked to global crude prices, unlike downstream refiners and fuel retailers that depend on refining margins and marketing economics.
- •LPG-related losses could keep the FY27 earnings of oil marketing companies such as Indian Oil, Bharat Petroleum and Hindustan Petroleum under strain, because India imports a substantial share of its LPG and domestic cylinder prices are not fully market-linked.
- •Gujarat Gas, one of India's largest city gas distribution companies, may face near-term earnings volatility as its profits depend on the spread between input gas costs and the prices of CNG and PNG sold.
ICICI Securities continues to view Oil India as its preferred pick in the oil and gas sector as the company's crude oil and natural gas production is set to rise, according to Probal Sen, oil and gas analyst at the brokerage.
Sen expects crude prices to hold around $90–$95 per barrel in the near term, while refining margins remain strong. That price view sits at the centre of the sector's earnings split: upstream producers such as Oil India — one of India's two large state-owned explorers alongside Oil and Natural Gas Corporation (ONGC) — earn realisations linked to global crude prices, while downstream refiners and fuel retailers are driven more by refining margins and marketing economics.
However, he pointed to two potential pressure points: losses on liquefied petroleum gas (LPG) could keep the earnings of oil marketing companies (OMCs) under strain in the 2026-27 financial year (FY27), and Gujarat Gas may face near-term volatility. The LPG exposure is a recurring pressure point for the sector: India imports a substantial share of the LPG it consumes, and domestic cylinder prices are not fully market-linked, so higher import costs are not always passed on to consumers. The trajectory of crude prices and any revisions to retail LPG rates are among the variables analysts track as FY27 approaches.
Oil India is a state-owned upstream company engaged in the exploration, development and production of crude oil and natural gas. India's oil marketing companies, which include Indian Oil Corporation, Bharat Petroleum and Hindustan Petroleum, retail fuels such as petrol, diesel and LPG across the country. Gujarat Gas is one of India's largest city gas distribution companies, supplying compressed natural gas (CNG) to vehicles and piped natural gas (PNG) to households, commercial establishments and industrial consumers. City gas distributors earn on the spread between the gas they procure and the prices at which they sell CNG and PNG, leaving earnings sensitive to input gas costs and to demand from industrial customers — the backdrop to the near-term volatility Sen flagged for Gujarat Gas.
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Source: CNBC-TV18
