Oil Stocks Outlook for the week – 24 to 28.08.2015
PSU
companies seen in a range, weak market may weigh
( www.rupeedesk.in )
Stocks
of most oil companies are seen trading in a range with a negative bias next
week as a weak broad market and declining crude oil prices are likely to weigh
on sentiments. Stocks of Indian Oil Corp Ltd will be in focus as the government
will sell 10% stake in the company on Monday through an offer for sale. The
floor price for the offer will be announced on Saturday but analysts believe
that the government is unlikely to give much discount from current levels. On
Monday, however, IOC stocks are seen opening down due to the offer for sale. Yesterday,
stocks of Indian Oil ended down 0.7% at 394.85 rupees.
Concerns
over slowdown in the global economy are likely to continue weighing on market
sentiments
in the coming week and that may have some impact on stocks of the state-owned
refiners as well as upstream companies. Following the cut in petrol and diesel
prices on Aug 14, marketing margins on diesel and petrol have declined by 2%
and 6%, respectively. However, refining margin on petrol and diesel, cracks in
industry parlance, have improved due to the sharp decline in crude oil prices.
But most analysts are of the view that refining margins will soon come under
pressure again.
While
fundamentals of IOC, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd
are still seen strong in the wake of diesel price deregulation, concerns over
margins and weak market
sentiments may play on the stock price keeping it in a range in near
term. Refining margins would be governed by global demand-supply; however,
pricing freedom gives power to increase marketing margins and improve earnings
in a more predictable way --which should lead to re-rating in OMCs (oil
marketing companies). Low crude prices will continue to weigh on Oil and
Natural Gas Corp Ltd and Oil India stocks, even as a weaker rupee may provide
some cushion