Oil Stocks
Outlook for the week – 14 to 18.07.2014
Stocks of state-owned oil
marketing companies are expected to stage a recovery next
week but trading may remain muted
as focus shifts to companies reporting Apr-Jun
earnings.
In line with a weak trend in the
broader markets, shares of Indian Oil Corp Ltd, Bharat
Petroleum Corp Ltd and Hindustan
Petroleum Corp Ltd declined sharply this week
despite the Union budget clearly
indicating a shift towards decontrol of diesel prices and
reduction of subsidies on cooking
gas.
During the week, price of the
Indian basket of crude oil declined sharply to below $106 a
barrel while the exchange rate
remained stable below the 60 rupees-a-dollar mark. The
effect of this could be factored
in next week, resulting in some uptick in the shares of the
three companies. However, the
extent of gains would be determined by the trend in the
broader market.
The oil ministry has already
recommended reduction in subsidies on all fuels and a sharp
reduction in subsidy burden on
the upstream oil companies till the time cooking gas and
kerosene are sold at below market
rates.
Among the private sector
companies, Reliance Industries Ltd may continue to face
pressure as its troubles with the
government intensify. News flow on the company's battle
with the government on
arbitration for KG-D6 gas pricing may provide direction to the
company's stocks.
The oil ministry has already indicated
its unwillingness to extend a higher price of gas for
KG-D6 until the shortfall of gas
produced over the last four years is met.Also, the
company has threatened that it
will not make further investments in the block unless it
gets a higher price.
