Oil Stocks Outlook
for the week – 17 to 21.10.2016
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The positivity surrounding stocks of upstream companies such
as Oil and Natural Gas Corp
Ltd, Oil India Ltd, and Cairn India Ltd is likely to
continue next week due to expectations that
prices of crude oil will rise further.
Global prices of crude oil could touch $52 per barrel next
week as Russia's decision to cut its
oil output in line with the Organization of the Petroleum
Exporting Countries will help trim
global supply. Russian President Vladimir Putin on Wednesday
said that the country will
comply with a joint production cut with the OPEC, if the
cartel was to reach an agreement.
On Sep 28, OPEC members had agreed on a production range of
32.5-33.0 mln
barrels per day. The final decision regarding the production
cut will be taken at the cartel's
meeting in Vienna on Nov 30.
However, the upside to crude oil prices in the immediate
term might be limited, given that a
massive glut still persists. Increasing supplies from Libya
and Iran might add to excess
supply, at least till OPEC walks the talk of cutting output.
The near-term view on ONGC is positive and the stock might
test 290-rupee levels next
week. Support for the stock is seen at 265 rupees. Outlook
for Cairn India is also positive,
with resistance for the stock pegged at 240 rupees and
support at 215 rupees. As for
downstream stocks of state-owned oil refiners Indian Oil
Corp Ltd, Bharat Petroleum Corp
Ltd, and Hindustan Petroleum Corp Ltd may rise next week,
after witnessing some correction
in recent sessions.
The near-term outlook for these stocks is positive, with
refining margins improving globally
and strong fundamentals. Significant growth in demand in the
domestic market is also seen
boosting sentiment. Indian Oil remains the top pick among
the three downstream stocks,
given high trading volumes, signs of a break-out, and
subsequent positive movement,
Resistance for the stock is seen at 660 rupees, while
support is pegged at 630 rupees.
Fluctuation in the dollar-rupee exchange rate is also likely
to affect stocks of oil companies.
If the dollar strengthens against the rupee, it will hit
refining companies and benefit
upstream players. A weak dollar, on the other hand, is
advantageous for downstream
companies.