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Firm crude oil prices pump up BSE Oil & Gas index to a multi-year high

The oil index hit a high of 12326.75 intraday, the highest level since January 21, 2008 before ending the session at 12160.14, up 2.6% from the previous close.

, ET Bureau|
Updated: Oct 07, 2016, 07.58 AM IST
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Crude oil prices rose on Thursday, with US crude surpassing the $50 per barrel mark for the first time since late June due to fall in US inventory levels.
Crude oil prices rose on Thursday, with US crude surpassing the $50 per barrel mark for the first time since late June due to fall in US inventory levels.
MUMBAI: The S&P BSE Oil & Gas Index hit an over eight-and-a-half year high on Thursday and was the best performer among BSE sector indices as firm crude oil prices drove in a rally in shares of oil marketing companies.

Crude oil prices rose on Thursday, with US crude surpassing the $50 per barrel mark for the first time since late June due to fall in US inventory levels. Last week, the Organisation of the Petroleum Exporting Countries reached an understanding to cut production to reduce the supply glut.

The oil index hit a high of 12326.75 intraday, the highest level since January 21, 2008 before ending the session at 12160.14, up 2.6% from the previous close. So far this year, the BSE Oil & Gas Index has gained 27.2%. In comparison, the S&P BSE Sensex has gained 7.6%.

Indian Oil Cor poration , Hindustan Petroleum Corporation and Bharat Petroleum Corporation ended up 3.7-5.4% after hitting fresh record highs intraday. Petronet LNG ended up 1% after scaling an all-time high. GAIL, up 3.5%, was the top gainer on the Sensex, as low gas prices are likely to benefit the company in terms of increase in transmission volumes.

“ONGC is gaining because of the rally in crude oil prices and gas companies like GAIL are rising because they will get marginal benefit from fall in gas prices,” said Dharmesh Kant, head of retail research at Motilal Oswal Securities.

Analysts said they are particularly betting on oil marketing companies in the sector as valuations remain cheap despite the sharp run up in their stock prices.

“Oil marketing companies are still cheap and they are also not facing the subsidy burden now,” said Jyotivardhan Jaipuria, MD, Veda Investment Managers.

IOC is also one of the key contenders for inclusion in the Nifty index going ahead, said analysts. Analysts are also betting on Reliance Industries as some of its large-scale projects are likely to commence operations in near future.

“Reliance’s refining capacity is expanding and it is not reflecting in the price,” said Deven Choksey, MD, KR Choksey Securities.

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