Virendra Verma

Mumbai , April 4

WITH international crude price crossing the $58-mark per barrel, oil drilling companies such as ONGC and Hindustan Oil Exploration Company Ltd (HOECL) are in demand at the stock markets even asthere is a concern over rising oil prices in general.

Brokers and analysts feel that with the rise in crude prices, these two companies would be the major beneficiaries.

In today's trading, ONGC gained 1.48 per cent at Rs 893.55 on the BSE, while HOECL gained 10.53 per cent at Rs 117.55.

However, refinery stocks remained weak as it (oil prices) might lead to low demand and also increased subsidy burden for them.

In early trades in the US today, light crude May Futures prices crossed $58, its highest level. Several institutional investors too have started buying the shares of ONGC after Goldman Sachs came out with a report on oil, saying that the crude prices could cross $100. In a report released last week, Goldman Sachs said: "We believe oil markets may have entered the early stages of what we have referred to as a "super spike" period — a multi-year trading band of oil prices high enough to meaningfully reduce energy consumption and recreate a spare capacity cushion only after which will lower energy prices return".

It said resilient demand has caused us to revise up our super-spike range to $50-$105 per barrel from $50-$80. "We see as much as 80 per cent of total return upside to super-spike-adjusted peak values and are comfortable recommending that investors add to positions in the sector at current prices, on a pull-back, or even after rallies".

Several market players said if oil prices keep increasing, these are the safest stocks with good return possibility. Moreover, players feel ONGC to be a safe bet at current levels as the various capital expenditure it has made in India and rest of the world would bring returns to the investors in the next couple of years.

© Copyright 2000 - 2009 The Hindu Business Line