Oil Stocks Outlook for the week – 18 to 22.04.2016
( www.rupeedesk.in )
Stocks
of the three public sector refiners--Indian Oil Corp Ltd, Bharat Petroleum Corp
Ltd,
and Hindustan Petroleum Corp Ltd--are likely to continue trading with a
positive bias on expectations of strong Jan-Mar earnings, backed by inventory
gains and robust
refining
margins.
There
are no major sector-specific triggers in the immediate term and trend will be dictated
by global prices of crude oil, broad market sentiment, and news flow. Prices of
crude oil have improved over the past few weeks but there has not been any sharp
rise. Despite an uptick in prices of crude oil being a negative for
oil-refining companies' margins, in the current environment, these entities too
have benefited from the slight improvement.
Stocks
of the three state-owned fuel retailers have reacted positively on expectations
of
inventory
gains as prices have inched up. Though prices of crude oil are largely seen
stabilising
after some upward movement in the near-to-medium term, a steep rise seems
unlikely.
As
far as upstream players like Oil and Natural Gas Corp Ltd, Oil India Ltd, and
Cairn
India
Ltd are concerned, the stocks are likely to trade in a narrow range with a
negative bias, and their fate will be decided by global prices of crude oil.
Weakness in these stocks continue in the absence of any major recovery in
prices of the commodity. Markets will be closely watching Sunday's meeting
between the Organization of the Petroleum Exporting Countries and other leading
producers, and whether it results in them freezing production at
January-levels.
However,
there is concern over whether such a deal is possible, given that a few major
producers
are indicating that they would consider freezing output only if other producers
agree to the same.
Apart
from that, focus of domestic equity markets will now be on corporate earnings
for
Jan-Mar, which is likely to shape sentiment in the broad market.
Fluctuation in the dollar-rupee exchange rate is also likely to affect stocks
of downstream and upstream oil companies. If the dollar strengthens against the
rupee, it will hit refining companies while benefiting upstream players. A weak
dollar, on the other hand, will help downstream companies as India primarily
relies on imported crude oil to meet its requirements.