Oil Stocks Outlook
for the week – 10 to 14.11.2014
( www.rupeedesk.in )
Stocks of state-owned oil marketing
companies – Bharat Petroleum Corp Ltd, Indian Oil Corp Ltd and Hindustan Petroleum Corp
Ltd -- and Oil and Natural Gas Corp Ltd are seen continuing the momentum next week
as crude prices remain benign though the rupee-dollar equation could spoil the
party a bit.
Also, any significant decline in the
prices of crude oil could weigh on ONGC and Oil India counters. The price of India's
crude oil basket hit a four-year low of $80.05 a barrel this week and the commodity is
expected to remain in a bearish trend in the near- to medium-term.
However, the Indian currency took a
hit today declining sharply to end at 61.61 for a dollar, its lowest level in three
weeks. While there could be a small recovery early next week, the Indian currency is expected
to hover around this level in the near term.
All the three oil marketing companies
and ONGC are scheduled to report Jul-Sep earnings next week. Not many
surprises may be in store as all of them are expected to report profits with timely
contribution of subsidies from the government.
Most market participants are now
positive on the public sector companies' stocks because of the improving
fundamentals, diesel deregulation and lower crude prices.
While further decline in crude prices
could hurt ONGC, the recent upward revision in gas prices will compensate to some
extent, aided by a sharp decline in contribution towards the oil marketing companies'
subsidies.
Diesel reform strategy (small regular
price hikes), in our view, will give confidence to the government to undertake bold
reforms in LPG and later in kerosene.
The view is supported by Morgan
Stanley which believes that the macro environment is now more conducive for the public
sector companies.
We expect OMCs and upstream earnings
to double over FY14-18 (2013-14 (Apr-Mar) to 2017-18). We expect RIL's (Reliance
Industries) growth to be lower than this, and Cairn's earnings to decline, driven
by lower oil prices and increase in government profit petroleum share," it said in a
report on Thursday.
