Oil Stocks Outlook for the week – 08 to 11.03.2016
( www.rupeedesk.in )
Stocks
of public sector oil refining and marketing companies are likely to trade in a
range
next week with a negative bias. The trend will be primarily dictated by news
flow,
broad market sentiment, and global crude oil prices.
Stocks
of the three state-owned refiners--Indian Oil Corp Ltd, Bharat Petroleum Corp
Ltd
and Hindustan Petroleum Corp Ltd--are seen weakening in the near term, as
refining
margins have started coming off historic highs seen in the last quarter, and
the
first half of the current one.
Also,
with winter demand waning and new refining capacities coming up in Asia, the
outlook
for gross refining margins has turned bearish. This is likely to put some
pressure
on stocks of refiners.
Stocks
of upstream as well as downstream companies will continue to track global
crude
oil prices, which have been volatile the past couple of months but are
witnessing
an uptick now.
Global
crude oil prices have shown some recovery over the past couple of weeks,
which
will work in favour of upstream stocks - Oil and Natural Gas Corp Ltd, Oil
India
Ltd and Cairn India Ltd. The Indian basket of crude oil has hovered around $33
per
barrel this week. Through most of last week, the basket was at $31-32 a barrel.
Even
though the US has very large volume of crude oil inventories, it has recently
reported
lowest levels of crude output since November 2014, lending some optimism
to
possibilities of a recovery in prices. The higher crude oil prices would put
some
pressure
on the margins of oil marketing companies in the near term.
ONGC
and Hindustan Petroleum are likely to announce their second interim dividend
next
week. This is being seen as a positive for the two scrips as some buying
activity
is
likely ahead of the dividend announcement.
Investors
will also be on the lookout for any announcement by oil producing nations
with
regard to crude production levels. Major oil producers have been in talks to
deal
with
the severe glut in the global oil market. Fluctuations in the dollar-rupe
exchange
rate is also likely to affect downstream as well as upstream stocks.