Oil
Stocks Outlook for the week – 08 to 12.12.2014
( www.rupeedesk.in )
Stocks of state-owned
oil marketing companies are seen range bound next week and will mostly
track crude oil
prices and the dollar-rupee movement amid lack of other triggers. However seen
some upside in Indian
Oil Corp Ltd, Bharat Petroleum Corp Ltd, and Hindustan Petroleum Corp
Ltd stocks from the
current levels if crude prices stabilize at current levels.
Sustained decline in
price of crude oil has had investors worried as the three companies were
piling up inventory
losses. Usually, these companies have crude inventory levels of 40-45 days.
Since these companies
are always selling oil products at prices lower than they are buying, they
are not able to make
much money and most gains due to the deregulation of diesel are being
wiped out.
Further, the
government has hiked excise duty on petrol and diesel two times in less than a
month, indicating
that the profitability of these companies will remain capped in the near term
and they may not see
much expansion in marketing margins.
While this is likely
to be a sentiment negative, we believe OMC (oil marketing companies)
performance could
continue to be supported by commodity prices remaining soft. Meanwhile,
cash-rich Reliance
Industries Ltd is planning a big bang re-launch of its fuel retailing
operations
in less than a month
with likely massive discounts to large industrial buyers of diesel and
transporters.
This could weigh on
sentiment for investors in BPCL, IOC, and HPCL, as RIL is likely to be an
aggressive competitor
and may take away their market share. On the positive side, the Indian
currency pulled back
a little this week from a nine-month low it had hit last week. Also, crude oil
prices have continued
to decline. The Indian basket of crude hit $67.98 a barrel on Thursday
from $70.29 at the
end of last week. Stable crude at lower prices would be seen as a positive for the financial health
of oil marketing companies.
