Oil Stocks Outlook for the week – 06 to 10.06.2016
(PSU
refiners likely to continue upward move)
( www.rupeedesk.in )
The shares of state-owned oil marketing companies Indian Oil Corp
Ltd, Bharat Petroleum Corp Ltd, and Hindustan Petroleum Corp Ltd are expected
to continue their strong showing next week, backed by strong fundamentals, and as
low prices of crude oil present opportunities for better marketing margins.
Any major sectoral triggers are unlikely and the trend will
largely be dictated by global prices of crude oil which have shown healthy signs of a recovery
over the past few weeks news flow, and broad market sentiment. BPCL (Bharat
Petroleum Corp) is the top pick among downstream stocks, followed by HPCL (Hindustan
Petroleum Corp) and then IOC (Indian Oil).
The recent recovery in oil prices has provided some support and
this could continue in the immediate term, should prices head north in the coming days.
For now, though, that seems unlikely. On the contrary, oil prices may begin to weaken
after weeks of ascent. With the Organization of the Petroleum Exporting Countries
disappointing hopes of a freeze in output, the four-week bull run in prices of crude oil is
likely to end next week as concerns over excess supply return to haunt the market.
After rising to a 10-month high of $50.21 a bbl on May 26, crude
prices have been unable to sustain gains. Speculation that Saudi Arabia--the
largest crude exporter-- would agree to freeze output at the OPEC meeting was put to rest
on Thursday after the cartel failed to arrive at a conclusion on keeping output
unchanged.
However, as these issues have now been somewhat resolved, the gain
in prices is unlikely to last. Apart from that, Iran and Iraq are pumping more
crude. Then there is US shale, which analysts see capping crude oil prices in the
near-to-medium term. Crude prices may remain capped in the medium term, as the US shale
can act as a 'swing' producer to provide a balance to global crude markets.
