Oil Stocks Outlook for the Week – 06 to 10.04.2015
( www.rupeedesk.in )
Stocks of the state-owned oil marketing companies are expected to
track broad market with
movements based mostly on news flow, when the market reopens next
week after a long break, as there are no major triggers in the near term.
However, softening crude oil prices could keep stocks of Indian
Oil Corp Ltd, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd
buoyant while weighing on stocks of Oil and Natural Gas Corp Ltd and Oil India
Ltd. Oil prices have corrected nearly 7% in the second half of March and the
Indian basket has dropped below $54 a barrel now after showing signs of
recovery in the first half. Expectations of a settlement between the consortium
of six countries and Iran on the latter's nuclear programme could further weigh
on the commodity.
It is estimated that once the sanctions are lifted, Iran could
soon more than double its oil production. Iran's production was restricted to 1
mln bpd versus 2.5 mln bpd prior to the sanctions. A 1.5 mln bpd addition would
add 1.5% to global oil supplies.
The 7% downward revision in domestic gas prices last week would
also weigh on sentiments and could keep the performance of upstream companies
muted. The lower gas price would have negative impact of around 12 bln rupees
and 1.3 bln rupees on estimated 2015-16 (Apr-Mar) earnings of ONGC and Oil
India.
For Reliance Industries Ltd the impact on 2015-16 earnings is
likely to be negligible due to declining stock of upstream earnings and also
because KG-D6 gas prices is still stuck at $4.2 per mBtu.
For the oil marketing companies, the environment is improving as
margins have expanded in recent weeks. The diesel margins have risen by 40% in
the last fortnight. The 0.5 paise per litre cut in petrol prices and 1.2 rupees
per litre reduction in diesel prices announced last week will not affect the margins
of IOC, BPCL and HPCL significantly.
