Oil Stocks Outlook for the week – 29.06.2015 to 03.07.2015 PSU oil retailers seen in range; Cairn weak

Oil Stocks Outlook for the week – 29.06.2015 to 03.07.2015
PSU oil retailers seen in range; Cairn weak

Stocks of state-owned oil marketing companies are seen moving in a narrow range next week in the absence of any major triggers. The trend will be dictated primarily by news flow and global crude oil prices. There could be some sentimental impact of the petrol and diesel price revision due on Tuesday. However, it is unlikely to be significant as it is now seen as a routine affair. The three PSU refiners Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd revise retail prices of petrol and diesel once a fortnight. If these companies do go ahead and effect a hike or a cut, their scrips are likely to move accordingly. Low crude oil prices and robust demand resulting in strong refining margins may keep also help stocks of the three companies’ upbeat in the near term.

Through the week, the three stocks will take cues from the broad market and movement in crude oil prices and the dollar-rupee exchange rates. The broad market will take cues from the ongoing talks between Greece and its creditors. Any possibility of a default by the European nation might trigger a financial crisis in the euro zone that will adversely impact global markets. Taking cue from the broad market, major oil stocks are also likely to perform in a subdued range; softening global crude prices due to oversupply might provide some cushion to downstream companies, while putting pressure on upstream players like Oil and Natural Gas Corp Ltd and Cairn India Ltd. The Indian basket of crude has been relatively stable between $60 and $65 per barrel for the past few weeks and only a sharp change in the prices would affect share movements.

The investor community will also watch out for outcome on Iran's talks with the West on nuclear weapons and a positive outcome on the same could lead to lifting of sanctions on the West Asian nation.

Back home, market participants will take cues from development of the monsoon in the short term and wait for the Parliament session for long-term direction. The Monsoon session of the Parliament starts on July 21. Cairn India Ltd's counter, however, is likely to trade with a negative bias as it may continue to be weighed down by the company's proposed merger with parent Vedanta Ltd. Any positive development on Cairn India's production sharing contract extension request for its flagship Rajasthan block may help the company's scrip.