Shares of Indian oil and gas companies were trading in the green on March 16, a day after oil prices fell for the third session to 2021 lows on banking sector fears. However, crude prices clawed back some ground in Thursday’s trade after as markets calmed somewhat after Credit Suisse was thrown a financial lifeline by Swiss regulators.

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"We are surrounded by so many uncertainities. We have already said prices will be volatile, so we shouldn't be surprised... This time around particularly, the financial markets turmoil is driving fears of recession, a lower lobal economic growth, and a fear of lower oil demand growth," Sushant Gupta, Director, Wood Mackenzie told CNBC-TV18.

Watch: Wood Mackenzie's Sushant Gupta on volatile crude oil prices

As the fears of a deepening crisis for banks worldwide prevailed, market sentiment remained fragile with both benchmarks giving up some early Thursday gains that saw Brent climb by more than $1. As of 12:09 pm, Brent crude futures were up 58 cents or 0.8 percent to $74.27 per barrel. West Texas Intermediate crude futures (WTI) rose 51 cents, also 0.8 percent, to $68.12 a barrel.

Following the movement in crude, back home in the domestic market, Indian oil and gas stocks were mixed with oil marketing companies (OMCs) like Indian Oil, Bharat Petroleum and Hindustan Petroleum gaining while oil explorers like ONGC and Reliance swung between red and green during the session.

Separately, during Thursday’s Parliament session, the government said while crude oil price (Indian basket) in rupee per barrel terms has increased by 23 percent from December 2021 to March 2023, the increase in retail selling price of petrol and diesel in Delhi has only been 1.08 percent and 3.40 percent, respectively.

The prices of petrol and diesel have not been increased by public sector fuel retailers since April 6, 2022, despite record high international prices, the Centre said, and pointed out that the three public sector OMCs — IOCL, BPCL and HPCL — have booked a combined loss of Rs. 18,622 crore during the April to December 2022 period.

Meanwhile, a monthly report from the International Energy Agency (IEA) released on March 15 projected a boost to oil demand from China, a day after OPEC increased its Chinese demand forecast for 2023.

OPEC's rosier outlook for China oil demand also supported oil prices, Lim Tai An, analyst at Phillip Nova Pte, told Reuters.

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However, oversupply concerns remain. The IEA said in the report that commercial oil stocks in developed OECD countries have hit an 18-month high, while Russian oil output stayed near pre-war levels in February despite sanctions on its seaborne exports.

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Meanwhile, higher interest rates can lead to depressed demand for oil as economic growth slows, but concerns about a widening financial crisis for the banking sector could also weigh on oil demand.

With agency inputs

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First Published:Mar 16, 2023 2:31 PM IST