Oil Stocks Outlook for the week – 23 to 27.01.2017
Oil Stocks Outlook for the week – 23 to 27.01.2017
Stocks of public sector oil refiners--Indian Oil Corp, Bharat Petroleum Corp, and Hindustan Petroleum Corp--are expected to trade in a band next week, even as sentiment for this stock is likely to remain positive over the next few sessions. These stocks are backed by strong fundamentals, including robust domestic demand for fuel, strong refining and marketing margins, and expectations of inventory gains due to a spike in crude oil and petroleum product prices over the past couple of months. A rise prices of crude oil in the recent past has helped stocks of upstream companies like Oil and Natural Gas Corp Ltd, Cairn India Ltd, and Oil India Ltd. The outlook for upstream stocks is positive for the next few sessions. In the absence of any major triggers, movement in stocks of oil companies is likely to depend on crude oil prices, news flow, and the broader market. The rise in prices of crude oil comes in the wake of the decision of the Organization of the Petroleum Exporting Countries to cut output by 1.2 mln barrels per day. It was further helped 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. Gross refining margins of state-owned oil marketing companies are expected in the healthy $6.8-$7.4 per barrel range, driven by strong product cracks and inventory gains. Tracking crude oil, futures contracts of the commodity are seen swinging between losses and gains in a narrow range next week due to mixed cues. While the commodity is expected to continue being supported by indications that oil producers may have started cutting output in full swing this month, a projected rise in production in the US may pull prices down. Early indications suggest a deeper OPEC reduction maybe under way for January, as Saudi Arabia and its neighbors enforce supply cuts. Investors will also eye rig count data from the US, to be released by oilfield services provider Baker Hughes later yesterday, for cues on the country's shale production. Any major fluctuation in the dollar-rupee exchange rates 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. On technical charts, stocks of both upstream and downstream companies look good for the immediate-to-near term.
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Oil Stocks Outlook for the week – 23 to 27.01.2017
( www.rupeedesk.in )
Stocks of public sector oil refiners--Indian Oil Corp, Bharat Petroleum Corp, and Hindustan Petroleum Corp--are expected to trade in a band next week, even as sentiment for this stock is likely to remain positive over the next few sessions. These stocks are backed by strong fundamentals, including robust domestic demand for fuel, strong refining and marketing margins, and expectations of inventory gains due to a spike in crude oil and petroleum product prices over the past couple of months. A rise prices of crude oil in the recent past has helped stocks of upstream companies like Oil and Natural Gas Corp Ltd, Cairn India Ltd, and Oil India Ltd. The outlook for upstream stocks is positive for the next few sessions. In the absence of any major triggers, movement in stocks of oil companies is likely to depend on crude oil prices, news flow, and the broader market. The rise in prices of crude oil comes in the wake of the decision of the Organization of the Petroleum Exporting Countries to cut output by 1.2 mln barrels per day. It was further helped 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. Gross refining margins of state-owned oil marketing companies are expected in the healthy $6.8-$7.4 per barrel range, driven by strong product cracks and inventory gains. Tracking crude oil, futures contracts of the commodity are seen swinging between losses and gains in a narrow range next week due to mixed cues. While the commodity is expected to continue being supported by indications that oil producers may have started cutting output in full swing this month, a projected rise in production in the US may pull prices down. Early indications suggest a deeper OPEC reduction maybe under way for January, as Saudi Arabia and its neighbors enforce supply cuts. Investors will also eye rig count data from the US, to be released by oilfield services provider Baker Hughes later yesterday, for cues on the country's shale production. Any major fluctuation in the dollar-rupee exchange rates 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. On technical charts, stocks of both upstream and downstream companies look good for the immediate-to-near term.
