GOLDEN RULES FOR TRADING

Oil Stocks Outlook for the week – 02 to 06.02.2015

Oil Stocks Outlook for the week – 02 to 06.02.2015

Stocks of state-owned oil marketing companies Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd
and Hindustan Petroleum Corp Ltd may open a tad muted next week as these companies are
unlikely to tinker with fuel prices even though a revision is due Sunday.

Global oil prices have recovered since the companies last revised petrol and diesel prices on Jan
16. While the companies had retained a small buffer then, there should be an upward revision in
prices from next week when petrol and diesel prices were hiked by 2 rupees a litre each. The
government had also hiked excise duty on the fuels by 2 rupees a litre.

There are talks that the government may ask the companies to skip the fortnightly revision this
week in view of the assembly elections in Delhi on Feb 7. While the move may not have a
significant financial impact for the three companies, it would be sentimentally negative.

However, the recovery in oil prices has helped these companies reverse inventory losses piled
over the last few months due to the sustained decline in crude oil prices. If the crude prices
continue strengthening or remain stable, stocks of the three fuel retailers will trade positive bias
on a weekly basis.

Stocks of Reliance Industries Ltd may also remain buoyant next week. While recovery in crude
oil prices will help the company recoup some of its inventory losses, it will also lift earnings
from its upstream business. Moreover, the company has decided to invest again in its KG-D6
block, lifting the uncertainty over the fate of the block over which it is embroiled in several
disputes with the government. The company's partner in the block BP plc said this week that they
will invest 60 bln rupees by 2016 to boost gas recovery from the block.

The two companies are also aiming to develop NEC-25 block on the Odisha coast that consists of many discoveries.