Oil Stocks
Outlook for the week – 27 to 30.01.2015
( www.rupeedesk.in )
Trading in stocks of state-owned
oil marketing companies are seen muted next week as focus
will remain on companies
reporting earnings. Crude oil prices will continue to dictate the course
for these stocks, though broadly
they may shuttle in a range.
Crude oil prices remained
relatively stable this week. The Indian crude basket has remained just
over $45 a barrel for the past
one week; trading in a tight range of 40-60 cents. Continued
stability in crude oil at lower
prices will be good for downstream companies Indian Oil Corp Ltd,
Bharat Petroleum Corp Ltd and
Hindustan Petroleum Corp Ltd.
Also, the Indian currency has
appreciated against the dollar over the last few days, which again is
beneficial to these companies as
they import most of their crude requirements. However in the
near term, concerns remain over
the massive inventory losses the three have piled up due to the
over-60% slump in crude prices in
the last six months.
According to data from the
Petroleum Planning and Analysis Cell, IOC, BPCL and HPCL are
currently operating at gross
refining margins which are lowest in the last four financial years.
This could erode their
bottom-line for Oct-Dec and may have a major bearing on Jan-Mar
earnings as well if inventory
losses are not reversed. All three will report earnings in February.
Since no major triggers are
expected in the near term, these stocks may continue to trade in a
range, taking cues from crude oil
and broad market movements. For the upstream companies Oil
and Natural Gas Corp Ltd and Oil
India Ltd, the low crude prices continue to remain a concern
as this directly affects their
earnings.
However, some reports this week
suggested that the two upstream companies may be exempted
from sharing the subsidy burden
of the oil marketing companies as long as crude prices stay
below $60-a-barrel mark. The move
will be positive, if announced. However, the relief will only
be marginal since current crude
prices are almost around the level ONGC spends on recovering a barrel of crude. These concerns
will continue to weigh on the stocks in the near term.
