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Stocks of state-owned oil marketing companies--Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd--are seen range-bound next week, but the bias will be positive as crude prices continue to soften amid slight strengthening of the rupee. The Indian basket of crude oil fell below $100 a barrel this week while the rupee ended above the sentimentally positive 54-for-a-dollar mark. The combined effect of the two is seen significantly positive for the public sector oil refiners.
Further easing of crude prices and strengthening of the rupee could help in wiping out the loss on sale of diesel--which accounts for over 60% of the revenue loss of these companies on subsidised fuels. The focus will be on upstream oil and gas companies next week ahead of the meeting of an Empowered Group of Ministers on gas pricing. The meeting is expected to be held on May 11 and may decide on a new formula for pricing of gas produced domestically.
While the oil ministry is not very keen to fully deregulate domestic gas prices, it is open to a new formula linking it to a cocktail of international gas prices--as proposed by a committee headed by Prime Minister's Economic Advisory Council Chairman C. Rangarajan. In December, the Rangarajan committee had suggested that prices of gas produced from fields in the country should be linked to an average of international hub prices and stripped down cost of imported liquid gas.
This could lead to significant increase in selling price of gas produced in India. A decision on this is most likely to be positive for upstream companies like Reliance Industries Ltd, Oil and Natural Gas Corp Ltd and Oil India Ltd. Stocks of these companies may gain slightly next week in anticipation of the EGoM decision.
