Oil
Stocks Outlook for the week – 25 to 28.08.2014
( www.rupeedesk.in )
The good run may
continue for the state-owned oil marketing companies next week as
the Indian currency
is seen stable around current levels while crude oil prices may
continue to fall in
the near term.
Stocks of Indian Oil
Corp Ltd, Bharat Petroleum Corp Ltd and Hindustan Petroleum
Corp Ltd may rise
more in the next few sessions after registering significant gains this
week if the fall in
crude prices continue. On the other hand, Reliance Industries shares are
seen muted next week
because of weakening refining scenario.
Crude oil prices have
unusually weakened over the last few months despite rising
geopolitical tensions
in the west Asia and Ukraine. We believe that recent developments
indicate further
negative implications in the near term for Brent crude prices. The Indian
crude oil basket
closely tracks Brent crude.
Any further decline
in crude oil prices will be significantly positive for the three refiners
as it would reduce
their losses on subsidised fuel and may even lead to deregulation of
diesel much before
expected.
In order to
capitalise on our negative outlook on Brent crude, we would like to place
positional long
trades in the oil marketing companies. Also, the rupee gained more than
20 paise yesterday to
end at 60.46 to a dollar.We expect the rupee to trade between
60.20-60.70 levels.
Adding that month-end demand from importers, mostly oil
companies, could
limit the appreciation.
For Reliance
Industries though, the near-term trend is negative as the refining margins
have weakened in the
past few weeks.
The benchmark
Singapore complex gross refining margin dropped below $3 a barrel in
the first half of
this month due to good run rate of refineries globally amid muted
demand.
The government is
likely to decide next week on how it plans to revise price
of gas produced
domestically. The pricing formula proposed by the Rangarajan panel,
which was to be
implemented from Apr 1, was deferred by the government. It later said
that a new mechanism
for gas pricing will be announced by Sep 30
