GOLDEN RULES FOR TRADING

Oil Stocks Outlook for the week – 26 to 30.10.2015 Crude prices key, PSU refiners seen in range

Oil Stocks Outlook for the week – 26 to 30.10.2015
Crude prices key, PSU refiners seen in range

Stocks of upstream oil companies will track the movement in crude oil prices next week
while those of state-owned oil marketing companies are seen in a narrow range due to
lack of imminent triggers.

Crude oil prices raised yesterday after the People's Bank of China announced 25 basis
points cut in its benchmark lending rate, the sixth since November. However, they soon
gave up gains and WTI was down nearly 2% at $44.54 per barrel on fear of high
inventories. The price of Indian basket of crude oil slipped below $45 a barrel this week
from around $47.30 last Friday, which weighed on the stocks of the oil producers.
However, hopes of improvement in demand from China, one of the largest importers of
crude oil and a likely announcement of new stimulus measures by the European Central
Bank may lift oil prices next week.

Oil and Natural Gas Corp Ltd and Oil India Ltd stocks may gain if crude oil prices move
up. Cairn India, which witnessed volatility and high volumes this week after reporting
poor Jul-Sep earnings, may also gain but the upside is likely to be capped due to a
proposal to merge the company with Vedanta Ltd. Cairn India's Jul-Sep consolidated net
profit for Jul-Sep slumped 70.5% on year to 6.73 bln rupees due to the sharp fall in oil
prices since last year.

Stocks of the state-owned refining companies--Indian Oil Corp Ltd, Bharat Petroleum
Corp Ltd, and Hindustan Petroleum Corp Ltd--are likely to remain in a range as none of
them are detailing earnings till the second week of November. While these companies are
expected to report weak Jul-Sep earnings due to inventory losses and lower refining
margins, the outlook has improved in view of uptick in demand for gasoline and
seasonally strong demand for furnace oil. Movement in crude oil prices will also be a key
for the shares of these companies as further decline may pile up inventory losses in Oct-
Dec as well, chipping off gains in gross refining margin.