Oil Sector Weekly Report – 06.11.2017 To 10.11.2017
Oil Sector Weekly Report – 06.11.2017 To 10.11.2017
Stocks of public sector oil refiners and retailers, Indian Oil Corp, Bharat Petroleum Corp, and
Hindustan Petroleum Corp, are likely to continue consolidating next week. Of the three stocks, HPCL
and BPCL are likely to be in focus next week, particularly in the later part, as the companies are
scheduled to detail their earnings for the September quarter on Thursday and Friday, respectively.
Both companies are expected to report robust earnings due to likely inventory gains and strong
product spreads. We expect both companies to report strong gross refining margins of $9-$10 per
barrel for the September quarter. HPCL's net profit for the three months ended September is seen
almost trebling to 20.91 bln rupees from 7.01 bln rupees in the corresponding quarter last year.
BPCL's Jul-Sep net profit is seen jumping 85% on year to 24.14 bln rupees. Shares of state owned upstream player Oil India Ltd will also be in focus late next week, as the company is scheduled to
detail its earnings on Friday; it is seen falling 12.4% on year to 5.08 bln rupees, even as net sales are seen rising 9.5% on year to 24.55 bln rupees. In terms of fundamentals, the three state owned oil marketing companies continue to be on solid ground, benefiting from healthy domestic demand for fuels as well as robust core refining and marketing margins, which lend a positive outlook to these stocks. In the absence of any major sectoral triggers, stocks of oil companies are expected to be guided by the movement in crude oil prices, news flow and the broader marker sentiment. Futures contracts of crude oil on global as well as domestic exchanges are likely to rise due to expectations that major producers will extend the production cut deal beyond March. The Organization of the Petroleum Exporting Countries, Russia and nine other producers have cut output by about 1.8 mln bbl per day since January. According to preliminary surveys, production by the oil cartel fell by 80,000 bpd in October, while compliance with the production cut deal was at 92%. This, too, is expected to support its prices.
Crude oil inventories in the US declined by 2.4 mln bbl to 454.9 mln bbl in the week ended Oct 27.
Petrol stockpiles fell 4.0 mln bbl to 212.8 mln bbl during the week, against expectations of a 1.8-
mln-bbl decline, according to Energy Information Administration. However, a rise in US exports to
record high levels and a rise in output are expected to keep the gains in check. Stocks of upstream
players such as Oil and Natural Gas Corp and Oil India may move in line with the movement in crude
oil prices next week. The fundamentals for these stocks have begun to improve, as strong oil prices
will lead to strong financial performance for upstream companies.
Any major shift in the dollar-rupee exchange rates could also impact stocks 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 Sector Weekly Report – 06.11.2017 To 10.11.2017
Stocks of public sector oil refiners and retailers, Indian Oil Corp, Bharat Petroleum Corp, and
Hindustan Petroleum Corp, are likely to continue consolidating next week. Of the three stocks, HPCL
and BPCL are likely to be in focus next week, particularly in the later part, as the companies are
scheduled to detail their earnings for the September quarter on Thursday and Friday, respectively.
Both companies are expected to report robust earnings due to likely inventory gains and strong
product spreads. We expect both companies to report strong gross refining margins of $9-$10 per
barrel for the September quarter. HPCL's net profit for the three months ended September is seen
almost trebling to 20.91 bln rupees from 7.01 bln rupees in the corresponding quarter last year.
BPCL's Jul-Sep net profit is seen jumping 85% on year to 24.14 bln rupees. Shares of state owned upstream player Oil India Ltd will also be in focus late next week, as the company is scheduled to
detail its earnings on Friday; it is seen falling 12.4% on year to 5.08 bln rupees, even as net sales are seen rising 9.5% on year to 24.55 bln rupees. In terms of fundamentals, the three state owned oil marketing companies continue to be on solid ground, benefiting from healthy domestic demand for fuels as well as robust core refining and marketing margins, which lend a positive outlook to these stocks. In the absence of any major sectoral triggers, stocks of oil companies are expected to be guided by the movement in crude oil prices, news flow and the broader marker sentiment. Futures contracts of crude oil on global as well as domestic exchanges are likely to rise due to expectations that major producers will extend the production cut deal beyond March. The Organization of the Petroleum Exporting Countries, Russia and nine other producers have cut output by about 1.8 mln bbl per day since January. According to preliminary surveys, production by the oil cartel fell by 80,000 bpd in October, while compliance with the production cut deal was at 92%. This, too, is expected to support its prices.
Crude oil inventories in the US declined by 2.4 mln bbl to 454.9 mln bbl in the week ended Oct 27.
Petrol stockpiles fell 4.0 mln bbl to 212.8 mln bbl during the week, against expectations of a 1.8-
mln-bbl decline, according to Energy Information Administration. However, a rise in US exports to
record high levels and a rise in output are expected to keep the gains in check. Stocks of upstream
players such as Oil and Natural Gas Corp and Oil India may move in line with the movement in crude
oil prices next week. The fundamentals for these stocks have begun to improve, as strong oil prices
will lead to strong financial performance for upstream companies.
Any major shift in the dollar-rupee exchange rates could also impact stocks 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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