Oil Stocks Outlook for the week – 05 to 09.Oct.2015
(PSU
refiners seen in range, upstream cos muted)
Stocks
of the state-owned oil marketing companies will continue to trade in a range
next week due to lack of triggers but those of the upstream companies are seen
muted due to weak sentiments following the downward revision in domestic gas
prices. Oil and Natural Gas Corp Ltd is expecting a 10-bln-rupee hit on its net
profit in 2015-16 (Apr-Mar) due to the 18% cut in the price of domestically
produced natural gas. Oil India too will see erosion in its bottomline.
The
revision was on expected lines and shares of ONGC ended with gains. Also a weak
rupee has cushioned the impact of the gas price cut. However, the rupee has
been in an upward trajectory over the last few days and any significant
appreciation could weigh on ONGC and Oil India shares.
Movement
for crude oil prices and rupee-dollar would be key for these stocks in the near
term. Shares of state-owned refiners--Indian Oil Corp Ltd, Bharat Petroleum
Corp Ltd and Hindustan Petroleum Corp Ltd--will continue to move in a range. While
the fundamentals for these companies have improved following diesel price deregulation,
most of that has been priced in. Refining margins, on the other hand, have weakened
in recent months.
Sentiments
are bearish in the refining business due to the approaching end of the driving season
in US, which could result in a slowdown in gasoline demand in the US, thus hurting
margins for refiners. However, Asian refining margins have witnessed slight recovery
due to strong regional demand.
