Natural gas stocks rally on hopes of CNG, PNG price cut to aid demand; IGL soars 3%, GAIL up 2.5%

Natural gas stocks

Several oil and gas companies have started cutting the prices of natural gas in the United States to increase demand. On Wednesday, natural gas stocks became a big draw for investors. Shares of GAIL, Oil India, and Indraprastha Gas Limited shot up during intraday trading on hopes that CNG and PNG prices would go down.

At the end of the day on NSE, GAIL India stock was up 2.5%, at 108.70. At the end of the day, the price of an Oil India share was up 2.08 percent, at 260.50. IGL shares ended the day up 3.06 percent, at 482 each. The price of Gujarat Gas shares shot up by 0.82 percent to 465.

On Wednesday, Fitch Ratings also approved of India’s plan to cap the prices of natural gas in its own country. It said that keeping the price of natural gas from legacy fields in the United States between $4 and $6.5 per million British Thermal Unit (mmbtu) will help city gas distributors keep their profit margins. It will also make more people want to buy petrol and make it easier for upstream producers to make money. “We expect such price cuts by city gas distributors and the setting of a price ceiling to add certainty to the price advantage of domestic natural gas compared to other fuels,” Fitch said on Wednesday. “This will support gas use for transportation and homes, as well as overall demand, over the medium term.”

Price cut by domestic natural gas producers

Kirit Parikh’s committee made some important suggestions about how to price natural gas from natural gas fields, and the Indian government recently agreed with them. After that, many oil and gas companies cut the price of natural gas. Gail India, Indraprashtha Gas, Mahanagar Gas, and Adani Total Gas all cut their prices at the same time.

GAIL said that its prices for CNG and cooking gas (PNG) will go down by up to 7 in some states. In and around Mumbai, Mahangar Gas cut the price of CNG by 8 per kg and the price of DPNG by 5 per SCM. In Delhi, CNG and PNG prices were also cut by 6 by Indraprastha Gas.

Earlier, Adani Total Gas cut its prices for CNG and piped natural gas by 8.13 per kg and 5.06 per standard cubic metre, respectively (SCM).

After the latest price change in the oil and gas industry, ICICI Direct told people to “Buy” five stocks in the oil and gas basket. This stock is:

  1. ONGC — (Buy at TP of 180)
  2. Reliance Industries — (Buy for 3,050 TP)
  3. Indraprastha Gas—(Buy for a total price of 463)
  4. Mahanagar Gas—(Buy for a total price of 980)
  5. Gujarat Gas—(Buy for a total price of 465)

In its report, the brokerage said that the pricing formula for HPHT fields like the one owned by Reliance Industries hasn’t changed, but the price for April 1–October 1, 2023 has dropped from US$12.5/mmbtu to $12.1/mmbtu. At first glance, the step would help domestic gas-using companies like IGL and MGL, which get 80% and 85% of their gas from APM, respectively. GGL, which gets about 25% of its gas mostly from APM, would also get some help.

Read more here: Prices for CNG and PNG fall; which oil and gas stocks should you buy?

Prices for CNG and PNG have gone down because the government agreed with several of the Kirit Parikh Committee’s key suggestions about how to price natural gas from APM fields. These are old fields, and most of them are owned by PSUs like ONGC. The change to the prices of natural gas in the United States took effect on April 8. Most of the price changes that the company made in CNG and PNG took effect on April 9th.

Also, the price of MCX natural gas futures went up by almost 2% on Wednesday, to 183.80 per mmbtu.

On the global scene, crude oil prices went up a little bit. Brent crude traded near $85.9 per barrel, which was up 0.3%, and US WTI traded at $81.70 per barrel, which was up 0.2%.

In its daily commodities outlook, ICICI Direct said that it expected natural gas futures to trade on a weaker note because stocks were expected to build up because production was expected to go up in 2023.

On Wednesday, before the US inflation report later in the day, crude oil prices stayed the same. At 9:17 GMT, the price of a barrel of Brent crude rose 14 cents, or 0.2%, to $85.75, while the price of a barrel of U.S. West Texas Intermediate rose 10 cents, or 0.1%, to $81.63.

According to ICICI Direct, crude oil prices are likely to stay high even though the EIA predicts that US and global benchmark oil prices will go up. Due to a drop in weekly inventory levels, crude oil prices are likely to go up even more.

“Expecting weekly inventory levels to go down could also help prices go up to their recent highs of $6,720. “It would go up to 6800-6900 if it went above 6720,” said ICICI Direct.

Source: Team CurrencyVeda