ICICI Securities has given a hold rating to Oil And Natural Gas Corporation (ONGC) with a target price of Rs 66.

The brokerage says global supply surplus in April 2020 may be as high as 29.7m b/d due to double whammy of demand collapse and output increase by Saudi Arabia, UAE and Kuwait; Opec Plus output cuts will start only in May’20.

However, recovery in oil demand and Opec Plus output cuts continuing may mean supply deficit from Sepetember’20, which may drive recovery in oil prices.

Such a recovery would augur well for ONGC’s earnings outlook in the second half of FY21, according to the brokerage.

Pace of demand recovery will be crucial. The share price of the company moved down by -0.93 per cent from its previous close of Rs 75.05.

The last traded price is Rs 74.35.

Incorporated in 1993, ONGC has a market cap of Rs 94415.00 crore. Investment RationaleOpec Plus has finalised a deal to cut output by 9.7 million barrels/day in May-Jun’20, 7.7 million barrels/day in the second half of CY20 and 5.8 million barrels/day in January’21 to April’22.

Opec Plus also expects US, Canada and Brazil to cut output by 3.7m b/d.

Whether Texas oil regulator decides in favour of imposing output cuts on April 21, 2020 is likely to be a key factor influencing near term oil prices.

FinancialsFor the quarter ended December 31, 2019, the company reported consolidated sales of Rs 109443.39 crore, up 7.77 per cent from last quarter sales of Rs 101554.26 crore and down -6.70 per cent from last year's same quarter sales of Rs 117305.80 crore.

The company reported net profit after tax of Rs 4898.68 crore in the latest quarter.