Oil Stocks Outlook For The Week – 11 To 15.12.2017
The shares of state owned refiners and retailers Indian Oil Corp, Bharat Petroleum Corp, and Hindustan Petroleum Corp may have a strong showing next week, continuing with the current spell of momentum that these scrips are witnessing. In terms of fundamentals, the three state owned oil marketing companies continue to be on solid ground, benefiting from healthy domestic demand for fuel as well as robust core refining and marketing margins, which lend a positive outlook to these stocks. In the absence of any major sectoral triggers, stocks of oil companies are expected to be guided by the movement in crude oil prices, news flow and the sentiment in the broader market.
Futures of crude oil are expected to rise globally next week due to the decision by Organisation of the Petroleum Exporting Countries and some other major exporters to extend their deal to cut output. Last week, OPEC and some other oil exporters such as Russia had agreed to extend the deal
to cut output by 1.8 mln bbl per day for another nine months to end of next year. However, the record high US output is likely to blunt the efforts of OPEC to reduce oversupply, thereby capping the gains.
Last week, crude oil output in the US rose by 25,000 bbl per day to a record high 9.707 mln bpd, according to the US Energy Information Administration. This was the seventh straight week when the US output had risen. Based on an average weekly increase of 25,000 barrels per day, as has been the case in recent weeks, production for the year as a whole would climb by an additional 1.3 mln barrels per day. This would be enough on its own to cover the entire growth in global oil demand. US
petrol inventories and distillate stocks had risen by 6.8 mln bbl and 1.7 mln bbl, respectively, which will also weigh on the prices. Among other negatives for crude oil is a stronger dollar index which has gained nearly 1% since the start of December. Stocks of upstream players such as Oil and Natural Gas Corp and Oil India may move in line with the movement in crude Down next week in line
with broader market oil prices next week. The fundamentals for these stocks have started improving, as strong oil prices will lead to a strong financial performance for upstream companies. Any major shift in the dollar-rupee exchange rates could also impact shares of oil companies. If the dollar weakens against the rupee, it could add to the woes of upstream companies. This is because upstream companies price oil and gas in dollar terms and a weak greenback pulls down the actual price realisation in rupee terms. On other hand, refining companies stand to gain from a weaker dollar, as it would reduce their outgo towards purchase of crude oil and gas.
Source : Cogencis Information Services Ltd.
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The shares of state owned refiners and retailers Indian Oil Corp, Bharat Petroleum Corp, and Hindustan Petroleum Corp may have a strong showing next week, continuing with the current spell of momentum that these scrips are witnessing. In terms of fundamentals, the three state owned oil marketing companies continue to be on solid ground, benefiting from healthy domestic demand for fuel as well as robust core refining and marketing margins, which lend a positive outlook to these stocks. In the absence of any major sectoral triggers, stocks of oil companies are expected to be guided by the movement in crude oil prices, news flow and the sentiment in the broader market.
Futures of crude oil are expected to rise globally next week due to the decision by Organisation of the Petroleum Exporting Countries and some other major exporters to extend their deal to cut output. Last week, OPEC and some other oil exporters such as Russia had agreed to extend the deal
to cut output by 1.8 mln bbl per day for another nine months to end of next year. However, the record high US output is likely to blunt the efforts of OPEC to reduce oversupply, thereby capping the gains.
Last week, crude oil output in the US rose by 25,000 bbl per day to a record high 9.707 mln bpd, according to the US Energy Information Administration. This was the seventh straight week when the US output had risen. Based on an average weekly increase of 25,000 barrels per day, as has been the case in recent weeks, production for the year as a whole would climb by an additional 1.3 mln barrels per day. This would be enough on its own to cover the entire growth in global oil demand. US
petrol inventories and distillate stocks had risen by 6.8 mln bbl and 1.7 mln bbl, respectively, which will also weigh on the prices. Among other negatives for crude oil is a stronger dollar index which has gained nearly 1% since the start of December. Stocks of upstream players such as Oil and Natural Gas Corp and Oil India may move in line with the movement in crude Down next week in line
with broader market oil prices next week. The fundamentals for these stocks have started improving, as strong oil prices will lead to a strong financial performance for upstream companies. Any major shift in the dollar-rupee exchange rates could also impact shares of oil companies. If the dollar weakens against the rupee, it could add to the woes of upstream companies. This is because upstream companies price oil and gas in dollar terms and a weak greenback pulls down the actual price realisation in rupee terms. On other hand, refining companies stand to gain from a weaker dollar, as it would reduce their outgo towards purchase of crude oil and gas.
Source : Cogencis Information Services Ltd.
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