Oil Stocks Outlook for the week – 29.12.2014 to 02.01.2015

Oil Stocks Outlook for the week – 29.12.2014 to 02.01.2015

Stocks of state-owned oil retailers Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corp may remain under pressure in the near term due to the consistent fall in crude oil prices, which is piling up inventory losses for these companies.

However, stability in prices of the commodity at lower levels may aid some recovery in stock prices. Broadly, these stocks may play in a range with a negative bias.

Brent crude oil prices were holding steady above $60 a barrel last day as fears of a supply gut were abated partially by Saudi Arabia's confident assumption of oil regaining $80 level next year and positive data on third-quarter economic growth in US along with declining jobless claims.

There are no key near-term triggers for the three counters. The fortnightly revision in diesel and petrol prices is due next week. Prices are most likely to be cut, but if crude prices recover in the next two to three days, the revision may be small which may provide some sentimental support to IOC, BPCL and HPCL stocks.

For determining prices of diesel and petrol, the prices of the fuels in the international market on the previous day are taken into account.

The low oil prices are also weighing in upstream companies Oil and Natural Gas Corp, Oil India and Cairn India. The three stocks will closely track prices of the commodity and are seen muted in the near term.

Futures contracts in ONGC and Reliance Industries witnessed some formation of short positions in the recent rollover to January contracts. These stocks may remain under pressure due to fall in crude oil prices and are sell on rise for us.

However, believe that RIL shares are more than pricing-in all negatives at current price since they have declined almost 11% since the beginning of this month. It is seen as a long-term buying opportunity at current prices.