Oil Stocks Outlook
for the week – 24 to 28.11.2014
( www.rupeedesk.in )
Stocks of state-owned oil
marketing companies--Indian Oil Corp Ltd, Bharat Petroleum Corp
Ltd, and Hindustan Petroleum Corp
Ltd--are seen rangebound with a positive bias next week
amid lack of near-term triggers.
The rupee-dollar movement will be
key for the sector after the sudden and sharp depreciation of
the rupee on Thursday. The rupee
is likely to remain weak and may trade in the 61.70-62.20 per
dollar band in the near
term.Crude oil prices are likely to trend lower, which could compensate
for any weakness in the rupee.
However, after two continuous
weeks of slide, there could be some value buying next week
ahead of expiry of November
derivatives contract on Thursday. That may only provide a cushion
on the downside but not much
upside.
While the outlook for IOC, BPCL
and HPCL has improved with the deregulation of diesel and
petrol prices and imminent
implementation of direct benefit transfer of cooking gas subsidy,
most of these moves have been
priced in.
Concerns have emerged on the
companies' margins as the global environment is seen weak in the
near term, and as inventory
losses have ruined their Jul-Sep earnings. We expect regional
refining margins to stay weak
over the next 12 months as new capacity comes online in the
region against the backdrop of
slowing demand growth.
Our Advisors is of the
view that any inflated margins in diesel due to falling oil prices
would only be momentary and
unlikely to sustain.
We expect inventory valuation losses
to increase in the quarter October December 2014 owing to
decline in oil prices since
September 2014 but stabilize after that," Moody's said, adding that recent reforms will help improve
the financial profile of IOC in the long run.
