Oil Stocks Outlook For The Week – 15 to 19.01.2018
The Shares of state-owned refiners and fuel retailers--Indian Oil Corp, Bharat Petroleum Corp, and Hindustan Petroleum Corp--are likely to consolidate next week. Of the three stocks, IOC and BPCL are expected to have an underlying negative bias, while HPCL is likely to be positive on charts.
In terms of fundamentals, however, the three state-owned oil marketing companies continue to
be on firm ground in the medium to long term, benefiting from healthy domestic demand for fuel
as well as robust core refining and marketing margins, which lend a positive outlook to these
stocks. However, in recent weeks, marketing margins are expected to have taken a hit, partly because of the recent spurt in prices of crude oil, the marketing margins for petrol and diesel might be at their lowest in Oct-Dec since diesel prices were deregulated in October 2014. On the other hand, a spurt in crude oil price can help refiners in booking inventory gains, which are common when crude oil prices rise steeply over a short period. The focus for these stocks will gradually shift to earnings expectations for the quarter ended December. In the absence of any other major sectoral triggers,
stocks of oil companies are expected to be guided by the movement in crude oil prices, news flow, and the sentiment in the broader market. Futures contracts of crude oil on both global and domestic exchanges are seen trading in a narrow range next week due to mixed global cues. Output cuts by major oil producers and a fall in inventories in the US are seen lending support to prices. However, some market participants expect a correction in prices, which have rallied to multi-year highs this week. According to US Energy Information Administration, crude oil production in the US is seen averaging 10.27 mln bbl per day in 2018, higher than 10.02 mln bpd as per earlier estimates. This was the highest annual average production estimated in US history. The stocks of upstream players such as Oil and Natural Gas Corp and Oil India may move in line with crude oil prices next
week. The fundamentals for these stocks have started improving, as strong oil prices will lead to a strong financial performance for upstream companies.
Source : Cogencis Information Services Ltd.
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The Shares of state-owned refiners and fuel retailers--Indian Oil Corp, Bharat Petroleum Corp, and Hindustan Petroleum Corp--are likely to consolidate next week. Of the three stocks, IOC and BPCL are expected to have an underlying negative bias, while HPCL is likely to be positive on charts.
In terms of fundamentals, however, the three state-owned oil marketing companies continue to
be on firm ground in the medium to long term, benefiting from healthy domestic demand for fuel
as well as robust core refining and marketing margins, which lend a positive outlook to these
stocks. However, in recent weeks, marketing margins are expected to have taken a hit, partly because of the recent spurt in prices of crude oil, the marketing margins for petrol and diesel might be at their lowest in Oct-Dec since diesel prices were deregulated in October 2014. On the other hand, a spurt in crude oil price can help refiners in booking inventory gains, which are common when crude oil prices rise steeply over a short period. The focus for these stocks will gradually shift to earnings expectations for the quarter ended December. In the absence of any other major sectoral triggers,
stocks of oil companies are expected to be guided by the movement in crude oil prices, news flow, and the sentiment in the broader market. Futures contracts of crude oil on both global and domestic exchanges are seen trading in a narrow range next week due to mixed global cues. Output cuts by major oil producers and a fall in inventories in the US are seen lending support to prices. However, some market participants expect a correction in prices, which have rallied to multi-year highs this week. According to US Energy Information Administration, crude oil production in the US is seen averaging 10.27 mln bbl per day in 2018, higher than 10.02 mln bpd as per earlier estimates. This was the highest annual average production estimated in US history. The stocks of upstream players such as Oil and Natural Gas Corp and Oil India may move in line with crude oil prices next
week. The fundamentals for these stocks have started improving, as strong oil prices will lead to a strong financial performance for upstream companies.
Source : Cogencis Information Services Ltd.
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