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Stocks of state-owned oil marketing companies are expected to trade in a narrow range next week taking cues from the rupee-dollar and crude prices movements while those of Reliance Industries Ltd are seen slightly up though a sustained weakness in broader market may weigh on the stocks. The rupee gained in strength this week against the dollar, which is good for Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd as they import over 75% of their crude oil requirements.
However, price of the Indian basket of crude gained slightly to $112.39 a barrel by Thursday from $110.64 last Friday taking away some of the gains from strengthening of the rupee. Also, the focus will be on government's compensation to these companies for selling oil products at subsidised rates. The three company's together incurred revenue loss of around 400 bln rupees on diesel, kerosene and cooking gas sales in Oct-Dec of which the upstream companies paid 151 bln rupees.
The government is yet to announce payment of remaining money to these companies, without which they may report massive losses. However, the downside is seen limited because the government has allowed these companies to revise diesel prices regularly, which is likely to benefit the them going forward.
Reliance Industries meanwhile may gain after the defence ministry has allowed work to progress on KG-D6 block, apart from 39 other oil and gas blocks. The company is already struggling to cap the declining gas output from the block and with the defence ministry threatening to stop work, it could have taken a bigger hit. Also global oil product prices have moved up in recent weeks resulting in an improvement in refining margins. Refining is the biggest driver of the company's earnings accounting for almost 80% of its revenues.
