ICICI Securities released its latest outlook for the oil and gas sector.

What Happened: The brokerage expects oil and liquefied natural gas (LNG) demand to remain strong in the near term.

It appeared optimistic about ONGC, OIL India, GAIL, Hindustan Petroleum Corporation Limited (HPCL) and Mahanagar Gas Limited (MGL) in the oil and gas sector with a "buy" call for the companies. It sees the operational and macroeconomic environment to stay favourable for this sector over the next 12-18 months.

It had an "Add" recommendation for Indraprastha Gas and a "hold" for Reliance. ICICI had a "reduce" call for Petronet LNG and Gujarat State Petronet. It recommended "sell" for Gujarat Gas.

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Oil demand is likely to increase over the next decade, the brokerage said. The expectation of US oil production gradually levelling off, combined with the limited spare production capacity among most OPEC+ countries, with the exceptions of Saudi Arabia, United Arab Emirates and Kuwait, is likely to maintain elevated oil prices above $85 per barrel during 2025-27.

It expects ONGC and Oil India to continue to sell their oil at prices above $75 (₹6,274.68) per barrel which will benefit their revenue and profitability. The brokerage expects ONGC's earnings per share (EPS) to stand at ₹46.5 for 2025 and at ₹55.7 for 2027. Oil India is expected to record an EPS of ₹45.9 in 2025 and ₹64.9 in 2027.

Gas companies are expected to experience relatively greater price stability over the next few years, ICICI Securities said. Crude prices could remain in a narrower band of $85-$90 per barrel (₹7,111.31-₹7,529.62) and LNG prices could range from $11- $11.7 (₹920.29-₹978.85) per metric million British thermal unit, it added. 

"This creates a relatively moderate pricing scenario for gas companies, which is an advantage for margin environment over FY25-27E," ICICI Securities said in its note.

Price Action: Most oil stocks settled lower on Friday.

ONGC was down 3.44% to ₹320.30, Oil India closed 2.29% lower at ₹571.50, GAIL lost 4.20% to close at ₹219.24, HPCL was down 4.38% to ₹342.00 and MGL declined 1.77% to settle at ₹1,696.70.

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