Oil Stocks Outlook for the week -12 to 16.12.2016
Oil Stocks Outlook for the week -12 to 16.12.2016
The stocks of public sector oil companies are likely to remain positive and continue to outperform the broad
market next week on the back of robust fundamentals. In the case of stocks of upstream companies such as Oil
and Natural Gas Corp Ltd, Cairn India Ltd, and Oil India Ltd, the recent upward movement in crude oil prices
has proved to be a shot in the arm.
The recent spurt in prices followed the Organization of the Petroleum Exporting Countries deciding to cut
output by 1.2 mln barrels per day. In this context, all eyes will be on a meeting between OPEC and non-OPEC
producers in Vienna on Saturday. Major non-OPEC producers are expected to agree to a coordinated
production cut with the oil producers' cartel.
The outlook for the stocks of state-owned oil marketing companies Indian Oil Corp Ltd, Bharat Petroleum Corp
Ltd, and Hindustan Petroleum Corp Ltd also remains positive due to continued strength in fuel demand and
robust refining and marketing margins.
Oil stocks have good chart structures at present and the bias is bullish. We expect them to continue
outperforming the market and the rally is expected to stretch. In the absence of any major triggers, the trend for
oil stocks is likely to be primarily dictated by the movement in crude oil prices. News flow and broader market
sentiment could also influence the stocks of oil companies.
Crude oil futures are likely to rise next week, as the market expects OPEC and non-OPEC producers to strike a
deal on a joint production cut. Non-OPEC producers are expected to curb output by 600,000 bpd, of which
Russia alone is to shoulder a production cut of 300,000 bpd. China imported 7.88 mln bbl of crude oil per day
in November. This was 16% more than in the (admittedly very weak) previous month, when imports fell to a
nine-month low.
This is also likely to support crude oil prices supported next week. The Market participants expect a rise in the
dollar next week on hopes of an interest rate hike in the US. Despite a strong dollar index, crude oil prices have
held their ground, which means the OPEC, not the dollar, is likely to be the key driver of prices of the fuel next
week too.
Fluctuation in the dollar-rupee exchange rates is also likely to affect the shares of oil companies. A weaker
rupee will benefit upstream companies, as they sell oil and gas in dollars. But refiners will lose if the dollar
strengthens, as their outgo for buying oil and gas will increase.
Free Intraday Tips : Join Our Whatsapp No : 9841986753
Free Commodity Tips : Join our Whatsapp No : 9094047040
Oil Stocks Outlook for the week -12 to 16.12.2016
