Oil Stocks Outlook for the week – 21 to 25.09.2015
(Seen range-bound
next week, bias negative)
( www.rupeedesk.in )
Stocks
of the state-owned oil marketing companies are likely to continue trading in a
range next week, taking cues from crude oil prices and rupee-dollar movements
in a volatile broad market ahead of September derivatives expiry.
Upstream
companies --Oil and Natural Gas Corp Ltd and Oil India Ltd-- are seen
weak in the near term as recovery in crude oil prices is seen slow.
According
to reports, the Organization of Petroleum Exporting Countries expects
oil prices to hover around $55 per barrel this year and rise only around
$5 a barrel per year thereafter to reach $80 by 2020. It though believes
that the demand from China may not slump, which will provide support
on the downside to crude oil prices.
Prolonged
low prices for crude oil may weigh on sentiments resulting in weakness in
shares of oil producing companies like ONGC and Oil India. Last week, Goldman
Sachs had cut its forecast for Brent crude oil price to $50 this year from $62
earlier and even warned that it may fall below $20.
However,
OPEC's statement may lend some predictability to the oil market and in turn
limit volatility in shares of these companies. Stable crude oil prices will
also reduce scope for inventory losses incurred by the oil refining companies
-- Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp
Ltd.
A
senior IOC official said this week that refining margins have softened in recent
weeks and in Jul-Sep were significantly below the historical highs seen in
Apr-Jun. The
IOC official said that in the current quarter, the company's GRM is seen around
$5 a barrel, accounting for the inventory losses following the decline in oil
and product prices. HPCL and BPCL officials also said that GRMs would be less
than $5 in the current quarter.
The
stock in seen weak in the near term also because of the likely fall in inflow
of foreign capital to emerging markets in the near term due to economic
uncertainties in major economies.
