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Oil Stocks Outlook for the week - 13 to 17.02.2017

Oil Stocks Outlook for the week - 13 to 17.02.2017


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Oil Stocks Outlook for the week - 13 to 17.02.2017
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Stocks of public sector oil refining and marketing companies-- Indian Oil Corp, Bharat Petroleum Corp, and Hindustan Petroleum Corp--are expected to rise next week as the general view on the three stocks is positive in the immediate-to-near term. These stocks are backed by strong fundamentals, which include a robust domestic demand for fuel, and strong refining and marketing margins. Hindustan Petroleum will be detailing its Oct-Dec earnings on Monday and the stock could see some activity early on in the week. Prices of crude oil have appreciated in the past couple of months, and has helped the stocks of upstream companies such as Oil and Natural Gas Corp Ltd, Cairn India Ltd, and Oil India Ltd. The outlook for upstream stocks continues to remain positive. In the absence of any major triggers, movement in stocks of oil companies is likely to depend on crude oil prices, news flow, and sentiment in the broader market. The rise in prices of crude oil followed the decision of the Organization of the Petroleum Exporting Countries to cut output by 1.2 mln barrels per day. It was further aided by major non-OPEC producers agreeing to cut output by 558,000 bpd to help trim the global glut. Though the rise in crude oil prices will increase input costs for refiners, they are set to benefit from inventory gains due to the spike. Also, given that prices of most fuels are now market-linked, the downside of higher crude oil prices for these companies seems limited for the time being. Tracking crude oil, futures contracts of the commodity are likely to trade in a range with a positive bias next week, as gains from production cuts by major oil producers are seen being offset by rising supply in the US. The three state-owned oil marketing companies are slated to revise prices of petrol and diesel on Wednesday. Although these fortnightly price revisions are routine, they may have some impact on the stocks of the three companies. Any major fluctuation in the dollar-rupee exchange rate could also affect shares of oil companies. A weaker rupee will benefit upstream companies, as they sell oil and gas in dollars. But refiners will lose if the dollar strengthens, as their outgo on buying oil and gas will increase.