Oil Stocks Outlook for the week – 22 to 26.05.2017

Oil Stocks Outlook for the week – 22 to 26.05.2017

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Oil Stocks Outlook for the week – 22 to 26.05.2017 )

Stocks of public sector oil refiners and retailers—Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd, and Hindustan Petroleum Corp Ltd--are seen trading on a mixed note in a run-up to their Jan-Mar earnings over the next fortnight. In terms of fundamentals, however, these companies are on solid ground and have been benefiting from the rise in domestic demand for fuels and robust refining and marketing margins, which lends them a positive outlook for the medium to long term. In the absence of any major sectoral triggers, stocks of oil companies may be affected by their Jan-Mar earnings, crude oil prices, news flow, and sentiment in the broad market. Indian Oil will detail its Jan-Mar earnings on Thursday, while Hindustan Petroleum and Oil and Natural Gas Corp Ltd will do so on Friday. Bharat Petroleum and Oil India Ltd will detail their earnings on May 29. Crude oil futures globally are seen rising next week as optimism over the likely extension of the output cut deal between major producers beyond June continues to strengthen. Earlier in the day, prices of global crude oil breached the $50-a-barrel level to hit a three-week high of $50.07 a bbl. Investors now await the decision by the Organization of the Petroleum Exporting Countries and other producers regarding the extension of the cuts. The producers are scheduled to meet on Thursday in Vienna. Kuwait also joined major producers Saudi Arabia and Russia in supporting an extension of production cuts through the remainder of the year and into 2018. It is widely expected an extension will occur, and energy officials from Saudi Arabia and Russia this week signaled they back a nine-month extension. OPEC and other producers had agreed to cut output by 1.8 mln barrels per day for the six-month period ending June to boost prices. Consequently, stocks of upstream players such as ONGC and Oil India may witness some strength on account of the likely appreciation in oil prices. Any major shift in the dollar-rupee exchange rate can 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 dollars and a weak greenback leads to a decline in 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.