Oil Stocks Outlook For The Week - 25 to 29.09.2017
Oil Stocks Outlook For The Week - 25 to 29.09.2017
( www.rupeedesk.in )
Stocks of public sector oil refiners and retailers like Indian Oil Corp, Bharat Petroleum Corp, and Hindustan Petroleum Corp are likely to trade in a narrow range next week with an underlying positive sentiment due to robust fundamentals. The three state owned fuel retailers continue to be on solid ground, benefiting from the rise in domestic demand for the fuels, as well as robust core refining margins, which lend a positive outlook for these stocks in the medium to long term. Refining
margins have been strong at $8.3/bbl since July 2017 due to high unplanned shutdown, globally; we expect this to continue for a while. After a bit of a slowdown in FY17, consumption of both petrol and diesel has grown strongly at 8.3% and 4.5%, respectively in FY18YTD (year to date)
Bearish on concern over weak demand In the absence of any other sectoral triggers, stocks of oil companies are likely to be influenced by prices of crude oil, news flow, and sentiment in the broader market. Futures contracts of crude oil on global and domestic exchanges are expected to gain next week on hopes of an extension of the production cut agreement of the Organization of the Petroleum Exporting Countries and other major producers. Investors will keep an eye on the OPEC and the non-OPEC Joint Ministerial Monitoring Committee meeting being held in Vienna yesterday. The market, however, does not expect any official announcement on the extension of production cut agreement at the meeting yesterday. Iraq Oil Minister Jabar al-Luaibi has said that his country, along with other members of the OPEC, were considering an extension to the output cut agreement through 2018, while an option of an additional 1% cut is also on the table. Kuwait Oil Minister Essam al-Marzouq has reportedly said that the compliance of OPEC and non-OPEC members to the production cut
agreement is improving and was above 100% in August. This will likely keep prices underpinned next week. However, Al-Marzouq denied any discussion on the extension of the output cut deal
at yesterday's meeting. Investors will also keep an eye on the independence referendum in Kurdistan, Iraq, due on Monday, as the nation is the second largest oil producer of the OPEC cartel and a large volume of oil exports come from the region. Stocks of upstream players such as Oil and Natural Gas Corp and Oil India may react in line with the movement in crude oil prices next week. Any major shift in the dollar-rupee exchange rate could also impact shares of oil companies. If the dollar weakens against the rupee, it could add to the woes of upstream companies. This is because upstream companies price oil and gas in dollar terms and a weak greenback pulls down the actual price
realisation in rupee terms. On the other hand, refining companies stand to gain from a weaker dollar, as it would reduce their outgo towards purchase of crude oil and gas.
Source : Cogencis Information Services Ltd.
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Oil Stocks Outlook For The Week - 25 to 29.09.2017
( www.rupeedesk.in )
Stocks of public sector oil refiners and retailers like Indian Oil Corp, Bharat Petroleum Corp, and Hindustan Petroleum Corp are likely to trade in a narrow range next week with an underlying positive sentiment due to robust fundamentals. The three state owned fuel retailers continue to be on solid ground, benefiting from the rise in domestic demand for the fuels, as well as robust core refining margins, which lend a positive outlook for these stocks in the medium to long term. Refining
margins have been strong at $8.3/bbl since July 2017 due to high unplanned shutdown, globally; we expect this to continue for a while. After a bit of a slowdown in FY17, consumption of both petrol and diesel has grown strongly at 8.3% and 4.5%, respectively in FY18YTD (year to date)
Bearish on concern over weak demand In the absence of any other sectoral triggers, stocks of oil companies are likely to be influenced by prices of crude oil, news flow, and sentiment in the broader market. Futures contracts of crude oil on global and domestic exchanges are expected to gain next week on hopes of an extension of the production cut agreement of the Organization of the Petroleum Exporting Countries and other major producers. Investors will keep an eye on the OPEC and the non-OPEC Joint Ministerial Monitoring Committee meeting being held in Vienna yesterday. The market, however, does not expect any official announcement on the extension of production cut agreement at the meeting yesterday. Iraq Oil Minister Jabar al-Luaibi has said that his country, along with other members of the OPEC, were considering an extension to the output cut agreement through 2018, while an option of an additional 1% cut is also on the table. Kuwait Oil Minister Essam al-Marzouq has reportedly said that the compliance of OPEC and non-OPEC members to the production cut
agreement is improving and was above 100% in August. This will likely keep prices underpinned next week. However, Al-Marzouq denied any discussion on the extension of the output cut deal
at yesterday's meeting. Investors will also keep an eye on the independence referendum in Kurdistan, Iraq, due on Monday, as the nation is the second largest oil producer of the OPEC cartel and a large volume of oil exports come from the region. Stocks of upstream players such as Oil and Natural Gas Corp and Oil India may react in line with the movement in crude oil prices next week. Any major shift in the dollar-rupee exchange rate could also impact shares of oil companies. If the dollar weakens against the rupee, it could add to the woes of upstream companies. This is because upstream companies price oil and gas in dollar terms and a weak greenback pulls down the actual price
realisation in rupee terms. On the other hand, refining companies stand to gain from a weaker dollar, as it would reduce their outgo towards purchase of crude oil and gas.
Source : Cogencis Information Services Ltd.
