Oil and gas stocks zoom up

Oil and gas stocks are doing very well today, ahead of the Cabinet Committee on Economic Affairs (CCEA) meeting, expected to take a call on natural gas pricing. But at the same time, there could be some disappointment too as the Power and Fertiliser Ministry is opposing any price hike.

ONGC, RIL, Oil India are all strongly up in the green today. The Petroleum Ministry has proposed a price of $6.77/mmBtu for domestically produced gas while the Power Ministry has said that any price beyond $5/mmBtu is unviable for the sector. Currently, domestically produced gas is sold in the range of $4.2-$5.75/mmBtu, spot (imported gas) at $13-$14/mmBtu and long-term contract at $11.5/mmBtu, this is excluding local taxes, and other costs.

But if the price hike is approved, analysts say that every rise of one US$ in the price of gas, will add Rs.3000 crore to the net profit of PSUs and Rs.2000 crore to that of private sector companies. Oil India has stated that if the price is hiked to the proposed US$6.77/mmBtu, its topline will rise by Rs.1000 crore and net profit will rise by Rs.625 crore.