ONGC's $60 per barrel notion crumbles, as crude oil slumps to 4-year low

Oil and Natural Gas Corporation (ONGC) has found its confidence tested as crude prices tumbled below the USD 60 mark — a level the state-run producer had recently insisted was unlikely to be breached.

On Monday, 7 April, the US benchmark West Texas Intermediate (WTI) crude slipped more than 4 per cent to USD 59.30 a barrel, marking its lowest level since 2021 and defying ONGC’s assurances.

Just a day earlier, ONGC director (finance) Vivek Chandrakant Tongaonkar had told a business newspaper that oil falling below USD 60 per barrel had a “very low” probability and that the company “should not face any economic difficulties” so long as prices held above that threshold. The Economic Times quoted him as saying, “We don’t envisage too much of a problem even if prices go down to USD 60. We will not make huge profits, but we will be okay with that.”

Those remarks have been overtaken by market developments, as fears over a global economic slowdown — triggered by US president Donald Trump’s proposed tariff hikes — have sent shockwaves through oil markets.

JPMorgan has now raised the odds of a US recession to 60 per cent this year, up from 40 per cent, citing the economic drag from the tariffs.

Brent crude, the global benchmark, also fell nearly 4 per cent to USD 63.21 a barrel, reflecting growing concerns of waning demand and oversupply. The sharp fall follows last week’s 11 per cent slump, driven by both Saudi Arabia’s aggressive pricing for Asian markets and a surprise increase in output from the OPEC+ alliance.

Crude oil prices are in a free fall .

Today Crude Oil is at USD 64 Dollars to a barrel.

Why @HardeepSPuri is the benefit not being passed onto the consumers .

What happened to dynamic pricing?

Is it a one way street that only goes up and does not go down ?

— Manish Tewari (@ManishTewari) April 7, 2025

The impact has been swiftly felt on Indian stock exchanges.

ONGC shares plummeted 9.3 per cent intraday to Rs 205, while Oil India dropped over 9 per cent to Rs 325 before seeing some recovery. ONGC’s stock is now down more than 10 per cent since the beginning of the year, while Oil India has shed over 23 per cent in 2025 so far.

As an upstream producer, ONGC’s earnings are highly sensitive to crude price movements. The company realised an average crude price of USD 78 per barrel during the nine months ending December 2024, which dipped to USD 72.5 in the October–December quarter. Should prices stay below USD 70 for an extended period, its profitability is expected to take a further hit this quarter.

Tongaonkar had admitted that “anything above USD 70 per barrel is good for us” and that the company would focus on cost control should prices remain low. However, with crude breaching the USD 60 mark, ONGC may face greater strain than it had prepared for.

Further compounding the situation is the risk to natural gas revenue. While higher domestic gas prices have so far cushioned ONGC’s balance sheet, these prices — currently at Rs 6.75 per metric million British thermal unit (mmbtu) — are pegged to global crude benchmarks. A sustained fall below USD 67.5 per barrel could see domestic gas prices slip as well.

Tongaonkar also pointed out that crude at such low levels is unsustainable not just for ONGC, but for producers globally. “Very low crude prices are not very conducive even for American producers. Even the Middle Eastern producers would not be comfortable with a USD 60 price or anything below that,” he said.

As crude prices test new lows, ONGC’s earlier assumptions appear increasingly optimistic. The current downturn is a stark reminder of the volatility that characterises — and the need for cautious forecasting amid shifting geopolitical and economic currents.