Oil Stocks Outlook for the week - 07 to 11.11.2016
Stocks of public sector oil marketing companies--Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd,
and Hindustan Petroleum Corp Ltd--are expected to consolidate in a range next week. On
fundamentals, however, the outlook for these stocks remains positive due to continued strength in
fuel demand and robust refining and marketing margins. The focus will be on the September
quarter earnings of oil companies. While a couple of majors have already announced their numbers,
others are expected to do so over the next couple of weeks.
In the absence of any other major sectoral triggers, the trend for oil stocks next week will largely be
dictated by global crude oil prices and the broad market sentiment, both of which will be impacted
by the outcome of presidential elections in the US, scheduled for Tuesday.
If Republican presidential nominee Donald Trump wins, equities globally are likely to fall further, as
he has called for stringent trade norms for the US. This could hurt major exporting companies
worldwide. However, if Democrat nominee Hillary Clinton comes to power, it might lead to a
rebound in shares, as she is expected to retain the current foreign policies. Any way expect similar
reactions in crude oil prices as well.
Most of the World investors are thinking would expect more downward pressure on crude from a
Trump win. Conversely, a widely expected 'relief rally' from a Clinton victory would support crude
prices. Apart from the election results, concern about lack of consensus among members of the
Organization of the Petroleum Exporting Countries on a production cut, and a sharp increase in US
crude oil inventories last week might weigh on crude oil prices next week.
Though OPEC members agreed on a cut in production to 32.5-33.0 mln bbl a day at a meeting in
Algiers last month, subsequent statements by members have cast doubt on whether the cartel will
be able to implement it. Piling inventories in the US, as seen in a 14.4-mln-bbl increase in crude oil
stocks last week, are also seen weighing on sentiment.
Oil production by the US increased by 18,000 bpd to 8.52 mln bpd in the week ended Oct 28. On
technically chart formed, both upstream and downstream stocks are likely to consolidate next week.
As for state-owned oil retailers, that despite the likely consolidation, the overall bias for the three
stocks remained positive for the medium term. Fluctuation in the dollar-rupee exchange rate is also
likely to affect the shares of oil companies. If the dollar strengthens against the rupee, it will hit
refining companies and benefit upstream players. A weak dollar, on the other hand, is advantageous
for downstream companies.
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and Hindustan Petroleum Corp Ltd--are expected to consolidate in a range next week. On
fundamentals, however, the outlook for these stocks remains positive due to continued strength in
fuel demand and robust refining and marketing margins. The focus will be on the September
quarter earnings of oil companies. While a couple of majors have already announced their numbers,
others are expected to do so over the next couple of weeks.
In the absence of any other major sectoral triggers, the trend for oil stocks next week will largely be
dictated by global crude oil prices and the broad market sentiment, both of which will be impacted
by the outcome of presidential elections in the US, scheduled for Tuesday.
If Republican presidential nominee Donald Trump wins, equities globally are likely to fall further, as
he has called for stringent trade norms for the US. This could hurt major exporting companies
worldwide. However, if Democrat nominee Hillary Clinton comes to power, it might lead to a
rebound in shares, as she is expected to retain the current foreign policies. Any way expect similar
reactions in crude oil prices as well.
Most of the World investors are thinking would expect more downward pressure on crude from a
Trump win. Conversely, a widely expected 'relief rally' from a Clinton victory would support crude
prices. Apart from the election results, concern about lack of consensus among members of the
Organization of the Petroleum Exporting Countries on a production cut, and a sharp increase in US
crude oil inventories last week might weigh on crude oil prices next week.
Though OPEC members agreed on a cut in production to 32.5-33.0 mln bbl a day at a meeting in
Algiers last month, subsequent statements by members have cast doubt on whether the cartel will
be able to implement it. Piling inventories in the US, as seen in a 14.4-mln-bbl increase in crude oil
stocks last week, are also seen weighing on sentiment.
Oil production by the US increased by 18,000 bpd to 8.52 mln bpd in the week ended Oct 28. On
technically chart formed, both upstream and downstream stocks are likely to consolidate next week.
As for state-owned oil retailers, that despite the likely consolidation, the overall bias for the three
stocks remained positive for the medium term. Fluctuation in the dollar-rupee exchange rate is also
likely to affect the shares of oil companies. If the dollar strengthens against the rupee, it will hit
refining companies and benefit upstream players. A weak dollar, on the other hand, is advantageous
for downstream companies.
