Shares of Oil India Ltd and Oil and Natural Gas Corporation (ONGC) traded marginally higher on June 5 on the back of firm crude prices after Saudi Arabia announced another round of crude oil production cut starting July.
The OPEC nation will cut crude oil supply by 1 million barrels per day.
Brent crude was up by 1.23 percent at $77.07 and West Texas Oil climbed 1.23 percent at $72.61 after the announcement.
Oil India was quoting Rs 255, up 2 percent on the National Stock Exchange (NSE) in the morning trade. ONGC was at Rs 155, up 0.26 percent on NSE.
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Oil producers like Oil India and ONGC benefit from higher crude prices as it translates into higher revenues for them. Every $1-a-barrel rise in crude realisation implies a 2-4 percent increase in earnings per share for these two companies, according to analysts’ calculations.
Saudi Arabia had reduced crude production by 500,000 barrels per day in April too. Saudi Arabia and other OPEC members including Iraq, UAE, Kuwait and Oman had trimmed crude oil production by a total of 1.16 million barrels per day in April. This was done to increase crude oil prices after the commodity reached lows in March in fears of the US banking crisis, the OPEC said.
OPEC in October had reduced crude oil production by 2 million barrels per day. The total production cut now stands at 4.5 million barrels per day.
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