Sharp oil stocks correction offer compelling entry point - Kotak Securities
This story was originally published at 15:51 IST on 22 June 2026
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MUMBAI – The sharp correction in oil and gas stocks in recent months mean there is a compelling entry opportunity, Kotak Securities said in a report dated Friday. The research firm continues to prefer Oil & Natural Gas Corp. Ltd. in the sector despite pressure from weaker prices of crude oil and retains a sell rating on Oil India Ltd.
"The extension of BP's partnership for entire Western reforms, recent reforms to ensure fiscal stability and rising NWG (new well gas) production are key positives," Kotak Securities said. The firm has cut earnings per share estimates on ONGC and Oil India for 2026-27 (Apr-Mar) by 17% and 14%, respectively, as it expects crude oil prices to fall further.
Prices of crude oil averaged $105 per barrel in the June quarter. Kotak Securities expects oil prices to average $85 per barrel in the September quarter, and sees it declining to $75 per barrel eventually.
"As bulk of the impacted SoH (Strait of Hormuz) disruption returns in 4QFY26, oil markets will likely be in surplus. However, there will be a need to replenish reserves and geopolitical premiums may remain elevated," Kotak Securities said. The firm had expected oil prices to average $95 a barrel in FY27, which it has now trimmed to $85. It has a long-term oil price assumption of $75 per barrel.
Oil prices edged higher to over $110 per barrel after the US and Israel together struck Iran on Feb. 28. However, prices have corrected sharply after Washington and Tehran signed a memorandum of understanding outlining a peace plan.
"While it is still an MoU, the decision to advance signing reflects urgency and wisdom. In our view, with the US and Iran agreeing to key points (though Israel's absence has been conspicuous) and intense global pressure, the likelihood of a final agreement is high," Kotak Securities said as it questioned if the warring nations were desperate to sign the pact. "That said, we believe geopolitical risks persist, with Iran's new realised ability to use the SoH as a lever likely to keep energy markets volatile," it said.
The war and the resultant spike in oil prices prompted countries part of the International Energy Agency to release crude oil stockpiles to ease prices. Observed oil stocks globally have fallen around 3.8 million barrels a day on an average since the war began. As of Jun. 12, countries part of the IEA had released around 252 million barrels of emergency oil stocks, Kotak Securities noted.
The IEA expects oil market to revert to a surplus by the December quarter. "As bulk of impacted SoH (Strait of Hormuz) disruption returns in 4QFY26, oil markets will likely be in surplus. However, there will be a need to replenish reserves and geopolitical premiums may remain elevated," Kotak Securities said. End
Reported by Anand JC
Edited by Akul Nishant Akhoury
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