Oil
Stocks Outlook for the week – 09 to 13.05.2016
PSU refiners seen in range; crude
price in focus
( www.rupeedesk.in )
Stocks of public sector oil refining
companies Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd, and
Hindustan Petroleum Corp Ltd are seen
trading in a range next week in the absence of any major
sector-specific triggers. Stocks of
oil companies are likely to be in tune with the broader market and
would be tracking global crude oil
prices and news developments pertaining to the sector. Refining
companies currently have strong
fundamentals and positivity around them on expectations of
favourable Jan-Mar earnings, backed
by inventory gains and robust refining margins.
Some market participants believe that
any weakness in the immediate term in downstream stocks
should be considered a buying
opportunity. Prices of crude oil have seen gradual improvement over
the past few weeks but there has not
been any sharp spike. Despite an uptick in prices of crude oil
being a negative for oil-refining
companies' margins, in the current environment, these entities too
have benefited from the rise.
Stocks of the three state-owned fuel
retailers have been reacting positively on expectations of
inventory gains as prices have inched
up. Prices of crude oil are largely seen stabilising after some
upward movement in the near-to-medium
term, and a steep rise seems unlikely. As far as upstream
players like Oil and Natural Gas Corp
Ltd, Oil India Ltd, and Cairn India Ltd are concerned, these
stocks are likely to trade in a
narrow range, and their movement will be decided by global prices of
crude oil.
However, fundamentals for upstream
companies continue to be weak as oil prices continue to be
subdued. Outlook for crude oil prices
for the coming week is not very positive. After climbing for four straight
weeks because of a decline in production from Venezuela, Libya, and Canada, oil
prices failed to sustain above $45-a-bbl as most of the interruptions to
production seem temporary.
Rising output from the Organization
of the Petroleum Exporting Countries and the likelihood of
increased production in the US may
weigh on prices. Even as oil prices gained mostly because of a
fall in US oil output, rising
inventories and speculation that shale oil producers might ramp-up output
if prices rise above $45 per bbl may
pull down prices. Apart from that, focus of domestic equity
markets will now be on corporate
earnings for Jan-Mar, which is likely to shape sentiment in the
broad market.
Fluctuations in the dollar-rupee
exchange rate are also likely to affect the stocks of downstream and
upstream oil companies. If the dollar
strengthens against the rupee, it will negatively hit refining
companies, while benefiting upstream
players. A weak dollar, on other hand, will help downstream
companies as India
primarily relies on imported crude oil to meet its requirements