Shares of government-owned oil exploration and production companies, Oil Natural Gas Corporation (ONGC) and Oil India, surged up to 10% on the BSE in Wednesday’s early trade as oil prices climbed to their highest levels since 2014.

Brent crude oil prices extended gains as the conflict in Ukraine continues, raising concerns of supply disruption from the oil exporter. Western nations have also placed more sanctions on Russia in response to its invasion of Ukraine.

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Brent futures rose about 5% on Wednesday to peak at $110 a barrel, their highest since 2014, a global agreement to release crude reserves also failed to lower concerns about supply disruptions from Russia’s invasion of Ukraine, according to a report by Reuter.

Among individual stocks, Oil India jumped 9.8% to Rs 245, while ONGC surged 4.6% to Rs 168.05 on the BSE intra-day. The S&P BSE Sensex was down 1% at 55,649 at 9.30 am.

ONGC and Oil India have outperformed the market in the past six months, having surged 41% and 30%, respectively, as against a 3.8% decline in the benchmark.

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For the upstream PSUs the earnings outlook has improved significantly on account of the recent hike in crude oil prices at above the $90 a barrel and expectation of a further sharp rise in the domestic gas price. High oil and gas prices would boost the overall profitability of ONGC and OIL. Although oil and gas production is likely to recover gradually with the majority of the growth being back-ended that is by FY24-FY25.

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According to brokerage firm ShareKhan, the recent sharp surge in crude oil prices and expected steep hike in domestic gas prices from April 2022 would drive a 40% CAGR in Oil India’s standalone profit after tax (PAT) over FY21-FY24E and improve RoE to 12.5% as against only 5.4% in FY21. Additionally, the recent stake increase in Numaligarh Refinery (NRL) could create long-term value for Oil India.

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The firm maintained a ‘Buy’ rating on Oil India and a price target of Rs 290 based on revised SoTP.

At 1.04 pm, Oil India (OIL) was trading 22.15 points or 9.93% higher at Rs 245.05 on the National Stock Exchange (NSE). ONGC was 4.40 points or 2.71% higher at Rs 165.00 on the NSE.