Oil Stocks Outlook for the week – 21 to 24.12.2015
(Under
pressure as crude prices continue to slide all time low)
( www.rupeedesk.in )
Stocks
of oil and gas production companies Oil and Natural Gas Corp Ltd
and
Oil India Ltd may come under pressure next week as crude prices
continue
to slide hitting all time lows. The West Texas Intermediate
crude
was trading below $35 a barrel and India's basket of oil was at a
seven-year
low of $33.33 a barrel on Thursday.
Stocks
of ONGC and Oil India ended with gains this week tracking an
upbeat
broad market, but are likely to come under selling pressure next
week
as investors are likely to book profits if crude oil prices continue to
slide.
After the decision by Organization of Petroleum Exporting
Countries
to maintain overall output at 30 mln barrels per day.
OPEC
members rarely adhered to production discipline, an abolition
hinted
at internal discord and 'each to his own' philosophy, indicating that
a
struggle for market share could deepen the already existing glut. This
could
mean a prolonged pressure on oil prices, which will bleed
producers
like ONGC and Oil India.
Given
the environment, where crude oil prices see-saw the cost of
production,
OIL (Oil India) is likely to face challenge to remain
operationally
profitable in case crude oil slips further.
Trading
volumes are seen muted next week ahead of the Christmas
holiday
season in most western countries and a curtailed trading week in
India
with Friday being a holiday due to Christmas. Stocks of oil
marketing
companies Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd
and
Hindustan Petroleum Corp Ltd are also seen under pressure despite
an
improvement in refining margins this quarter.
The
sharp fall in crude and product prices in Oct-Dec may result in
inventory
losses for these companies with IOC seen as the worst affected
as
it maintains around 45 days of inventory compared with 22-25 days of
HPCL
and BPCL. The Indian basket of oil has averaged $43 in Oct-Dec,
compared
with $50 in Jul-Sep, but the fall has been sharper in recent
weeks.
Reliance
Industries Ltd is likely to benefit the most from the robust
refining
margins. Increasing demand for products, especially naphtha,
petrol
and diesel will lift overall gross refining margins -- more so for
complex refineries of RIL