State-run oil producers attract buying interest as elevated crude prices improve realisation prospects; brokerages remain positive on ONGC and Oil India

Shares of Oil India and Oil & Natural Gas Corporation (ONGC) advanced sharply in Thursday’s intraday trade as Brent crude remained above the psychologically important $100-per-barrel mark. The rise in oil prices has renewed investor interest in upstream exploration and production companies, which can benefit from stronger crude realisations.

Oil India and ONGC gained around 3 per cent each on the BSE in an otherwise subdued domestic market. At around 9:33 AM, Oil India was trading 2.5 per cent higher at ₹511.35, close to its 52-week high of ₹531 recorded on May 14, 2026.

ONGC was up around 2 per cent at ₹238.65 at the time, while the Sensex and Nifty50 remained largely flat.

Brent Crude Crosses $100

Brent crude crossed the $100-a-barrel level on Wednesday, reaching its highest point in more than six weeks as geopolitical tensions between the United States and Iran intensified.

Before the latest escalation, Brent had been trading around the $70–75-per-barrel range. The sharp increase has introduced a significant geopolitical risk premium into global crude markets.

Concerns over shipping routes and key energy infrastructure in the Gulf region have added to uncertainty around future crude supplies. Any prolonged disruption could keep prices elevated and increase volatility across global commodity markets.

Why Higher Crude Prices Benefit Upstream Companies

Higher crude prices are generally positive for upstream companies because they can improve the realisation received on oil production.

Unlike fuel-marketing companies, which can face margin pressure when crude prices rise but retail prices remain relatively stable, exploration and production companies typically benefit directly from stronger commodity prices.

This explains the positive reaction in ONGC and Oil India shares as investors reassess their earnings potential in a higher-price environment.

However, the actual benefit depends on production volumes, government policies, price realisations, taxation and the duration of the crude-price rally.

Oil India Nears 52-Week High

Oil India has been one of the stronger performers among upstream stocks.

The stock reached an intraday high of ₹524.45 and was trading close to its 52-week high of ₹531. The recent price performance has been supported by expectations of stronger production as well as the company's expansion plans.

ICICI Securities expects the positive momentum in Oil India's stock to continue as the company's upstream and downstream expansion projects begin contributing more meaningfully over FY27–29E.

ICICI Securities Maintains Buy on Oil India

ICICI Securities has maintained a Buy rating on Oil India and assigned a target price of ₹600.

The brokerage has incorporated its FY29E earnings estimates into its assessment and expects a strong improvement in the company's earnings profile.

According to the brokerage, revised estimates incorporating stronger production and changes in gas realisation expectations indicate an EPS CAGR of around 25 per cent between FY26 and FY29E.

The brokerage also expects an improvement in return ratios and free cash flow generation.

Valuation Seen as Attractive

ICICI Securities highlighted that Oil India is trading at approximately 6x FY29E EPS and around 4x EV/EBITDA, which it considers attractive relative to the company's growth prospects.

The brokerage also pointed to an estimated 4 per cent dividend yield as an additional positive factor for investors.

The combination of earnings growth, expansion projects, free cash flow and dividend potential could support the stock if execution remains on track.

ONGC Trades Below Historical Valuation

ONGC has also attracted positive brokerage commentary despite the stock remaining below its recent 52-week high.

Motilal Oswal Financial Services estimates that ONGC currently trades at approximately 5.7x FY28E consolidated P/E, below its long-term average one-year forward P/E of around 6.5x.

The brokerage believes the market may be pricing in a relatively conservative crude-price scenario for the company's core operations.

After accounting for the value of ONGC's listed investments and ONGC Videsh, analysts believe the implied valuation of the core business effectively discounts Brent crude at around $65 per barrel over Q2FY27-FY28.

Motilal Oswal Retains Buy on ONGC

Motilal Oswal has maintained a Buy rating on ONGC with a target price of ₹290.

The brokerage's valuation is supported by expectations of improving production trends, with FY26-FY28 production CAGR estimates of approximately -0.3 per cent for oil and 2.1 per cent for gas.

The relatively low valuation, combined with the possibility of higher crude realisations, provides a potential earnings cushion if oil prices remain elevated.

Oil India Benefits From Expansion Plans

Oil India's investment case extends beyond the immediate impact of higher crude prices.

The company is pursuing expansion across both its upstream and downstream businesses, which could provide additional growth avenues over the next several years.

ICICI Securities expects the implementation of these projects during FY27–29E to strengthen the company's earnings trajectory.

Higher production volumes, improved gas realisations and expansion of the company's operating footprint could help reduce the dependence on crude-price movements alone.

FY26 Crude Realisation Was Lower for Oil India

The current rally in crude prices comes after a relatively weaker pricing environment for Oil India during FY26.

The company reported an average crude oil price realisation of $69.04 per barrel in FY26, compared with $78.09 per barrel in the previous financial year.

The decline in average realisation had moderated earnings during FY26.

If elevated crude prices persist for a sustained period, the improvement in realisations could provide a favourable operating environment for upstream producers.

Geopolitical Risk Becomes a Key Variable

The latest crude rally is primarily being driven by geopolitical developments rather than a sudden structural increase in global demand.

Escalating tensions involving the US, Iran and regional actors have raised concerns over energy infrastructure and critical shipping routes.

According to commodity-market analysts, the return of a geopolitical risk premium has changed the short-term crude-price outlook.

The key question for investors is whether the disruption remains temporary or develops into a prolonged supply shock. A sustained disruption could keep crude prices elevated, while a diplomatic breakthrough could result in a rapid reversal of the geopolitical premium.

ONGC Sees Near-Term Tightness, Medium-Term Easing

ONGC has described the crude outlook as a sharp divergence between near-term supply tightness and potential medium-term easing.

The company believes prices are increasingly responding to geopolitical developments ahead of underlying physical-market fundamentals.

This distinction is important for investors because a temporary price spike may boost near-term earnings but may not necessarily justify a permanent re-rating of upstream stocks.

For a sustained re-rating, investors are likely to look for evidence of higher production, stronger cash flows and disciplined capital allocation alongside elevated crude prices.

Risks for Investors

Despite the positive outlook, upstream stocks remain highly sensitive to commodity prices and government policies.

A sharp reversal in crude prices could reduce earnings expectations and put pressure on valuations. Production delays, cost inflation, regulatory changes, taxation and weaker gas realisations could also affect profitability.

For ONGC and Oil India, investors should therefore monitor both production growth and crude-price trends, rather than relying solely on the current oil-price rally.

Market Outlook

The outlook for Oil India and ONGC remains constructive as Brent crude stays above $100 a barrel and geopolitical risks continue to support international oil prices.

Oil India's expansion plans, expected earnings growth and attractive valuation have led ICICI Securities to retain its Buy recommendation with a ₹600 target. ONGC also remains favourably positioned from a valuation perspective, with Motilal Oswal maintaining a Buy rating and ₹290 target.

In the near term, crude prices and developments in West Asia will remain the biggest triggers for upstream stocks. If Brent remains elevated while production and execution improve, the earnings outlook for ONGC and Oil India could strengthen. However, investors should remain alert to a potential reversal in crude prices if geopolitical tensions ease.