Synopsis: Rising Middle East tensions have lifted oil prices, prompting Citi to turn bullish on Reliance Industries and ONGC, citing stronger refining margins and higher crude realisations, while highlighting risks across India’s gas value chain.
This article outlines Citi’s view on rising oil prices amid Middle East tensions that could support refining margins and upstream realisations. It also highlights potential risks across India’s gas value chain, particularly for LNG importers, transmission companies, and city gas distributors.
Middle East Tensions Raise Risks Across India’s Gas Value Chain
Escalating tensions in the Middle East could disrupt global energy flows, with the gas value chain facing a higher risk than oil. India imports nearly 40 to 50 percent of its LNG from Qatar, making supply replacement challenging amid rising global LNG prices.
Companies linked to LNG imports may face operational pressure if disruptions intensify. Firms such as Petronet LNG Limited could see elevated volume risk, while transmission volumes for GAIL (India) Limited may also be impacted if gas availability tightens.
Within city gas distribution, companies with higher exposure to imported LNG could be more vulnerable. Gujarat Gas Limited faces relatively higher risk due to dependence on Qatar and spot LNG, while oil marketing companies may encounter margin pressure from volatile energy costs.
Ahead of the recent escalation in Middle East tensions, Citigroup had already expressed a constructive view on several large Indian oil and gas companies, highlighting improving refining margins and a stable upstream earnings outlook.
The brokerage noted that higher crude price trends and better diesel cracks could strengthen profitability for major integrated and upstream players, prompting a positive stance on key sector stocks.
Reliance Industries Ltd
Reliance Industries Limited is India’s largest private-sector company, operating across energy, petrochemicals, retail, and digital services. Led by Chairman Mukesh Ambani, it owns major businesses like Jio Platforms and Reliance Retail, driving growth through telecom expansion, consumer retail, and new energy initiatives.
Citigroup turned bullish on Reliance Industries Limited, citing potential gains in its O2C business as stronger refining margins—especially in diesel—are expected to support profitability and earnings momentum.
Last month, Citi even gave a Buy recommendation to the stock with a target price of Rs 1,815, which is an upside of 30.8 percent on expectations of a better performance from the company.
Oil & Natural Gas Corpn Ltd
Oil and Natural Gas Corporation (ONGC) is India’s largest state-owned oil and gas explorer, established in 1956. It contributes ~70 percent of India’s crude oil and ~84 percent of its natural gas production. A Maharatna company, it operates throughout the hydrocarbon value chain, including offshore/onshore exploration, production, and refining.
Citigroup turned bullish on Oil and Natural Gas Corporation, noting upstream producers could benefit from higher crude prices, provided the government does not re-impose windfall taxes.
Previously, Citigroup reiterated its target on Oil and Natural Gas Corporation with a target price of Rs 245, implying about 9 percent reiteration from the previous target, driven by higher FY26–FY28 EBITDA estimates and a 4–6 percent increase in oil and gas production guidance.
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