Oil India Edges Out ONGC in Crude Price Boom

The sharp rise in crude oil prices is a direct earnings boost for India's upstream producers. Two prominent companies, Oil India and ONGC, are among those that could benefit from this price increase. However, analysts point out that while both companies have their advantages, one may be better positioned to take advantage of the rising crude prices.

Nilesh Ghuge, a Research Analyst at HDFC Securities, notes that higher crude prices lead to increased realisation for upstream producers. This is because production costs do not rise in line with every move in crude prices, allowing for a sustained increase in oil prices to flow through to operating profit. Ghuge believes that Oil India's recent production trend gives it an edge over ONGC.

Oil India has been adding crude volumes faster, while ONGC has a larger production base and several projects aimed at lifting output. The difference becomes important if crude stays near or above the $100 per barrel mark for several quarters. A higher realisation on existing production helps both companies, but the company that adds more barrels and gas can capture a larger incremental benefit.