Oil Stocks Outlook for the week – 25 to 29.05.2015

Oil Stocks Outlook for the week – 25 to 29.05.2015

 PSUs to track earnings, upstream companies positive

( www.rupeedesk.in )

Stocks of state-owned oil companies will be in focus next week as all five of them are scheduled to report their Jan-Mar results in second half of the week. No surprise is likely in the performance of Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd, Hindustan Petroleum Corp Ltd, Oil and Natural Gas Corp Ltd and Oil India Ltd as their performance usually depends on subsidy sharing and disbursal.

In the last quarter, the oil marketing companies usually report good profits as they are compensated for their entire pending revenue losses on subsidised fuels. For the upstream companies, the government has already said that ONGC and Oil India will not have to take the burden this time round. Trade in stocks of these companies may remain volatile in the first half of next week in line with the broad market, ahead of May futures expiry on Thursday. For ONGC, net profit is seen 10% higher on year at 53.8 bln rupees, while Oil India's bottomline may grow 51% to 8.5 bln rupees.

However, these two counters may trend up after ONGC confirmed that the government has already intimated a subsidy-sharing formula for Apr-Jun. Under the formula, ONGC and Oil India would not have to share loss on sale of subsidised fuels if crude price stays below $60/bbl on an average during the quarter. The two companies would bear 85% of the under-recovery on account of crude price exceeding $60 per bbl and 90% of the underrecovery on account of crude crossing $100 per bbl.

The move is a positive one as there was no clarity on the subsidy sharing so far, and it followed ad hoc decisions. Also the formula will ensure higher realisations for the upstream companies. IOC is expected to report net profit of around 46 bln rupees in Jan-Mar, down 51% on year while BPCL's bottomline may also decline 51% to around 20 bln rupees.

HPCL may witness a 73% decline in its Jan-Mar bottomline to 12.4 bln rupees. However, for oil companies, comparison with previous periods’ earnings is not meaningful due to inconsistent and unpredictable subsidy disbursement by the government. Operational parameters would be key and the refining margins of all three are expected to improve in Jan-Mar in line with trend.

Oil Stocks Outlook for the week – 11 to 15.05.2015

Oil Stocks Outlook for the week – 11 to 15.05.2015

Stocks of state-owned oil marketing companies Indian Oil Corp Ltd, Bharat Petroleum

Corp Ltd and Hindustan Petroleum Corp Ltd are seen range bound next week but the bias

is seen positive.

While broad market trend will be key, crude oil prices and rupee-dollar fluctuations

would continue to dictate the movement in the three stocks. The sharp depreciation of the

rupee this week spooked investors, leading to a massive decline in the shares of IOC,

BPCL and HPCL.

The rupee dipped below the 64-a-dollar mark on Thursday before recovered. It ended at

63.93 a dollar on Friday, a depreciation of 1% since last week. Since the companies

import 70-75% of their crude oil feed stock, a depreciation of the rupee hits costs and a

sharp fluctuation of the currency could also cause inventory losses.

The broad market trend will depend on developments in Parliament over key bills next

week as well as domestic economic data. On the other hand, sentiments are in favour of

Oil and Natural Gas Corp Ltd and Oil India Ltd after media reports quoted government

officials as saying that these companies would not have to share the downstream

companies' subsidy burden this financial year.

If the government officially confirms this development, further upside is likely in these

two companies' stocks. A weaker rupee will also improve their realisation as prices are

marked in dollars. Reliance Industries Ltd is, however, seen under pressure as it gets into further regulatory trouble related to its telecom business. The Comptroller and Auditor General of India today said RIL arm Reliance Jio Infocomm received undue advantage amounting to 34 bln rupees after the telecom department allowed it to provide voice calling facility under the new licensing regime.

Oil Stocks Outlook for the week – 04 to 08.05.2015

Oil Stocks Outlook for the week – 04 to 08.05.2015

 ( www.rupeedesk.in )

Stocks of state-owned oil refining and marketing companies Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd may recoup slightly next week after two consecutive weeks of losses. Stocks of the upstream companies may next week a tad after government officials said that all upstream companies will be exempted from downstream oil subsidies in 2015-16 (Apr-Mar) thereafter. The subsidy on liquefied petroleum gas and kerosene is seen around 400 bln rupee in the current financial year and it will be borne entirely by the government.

The move will be a bog boost for Oil and Natural Gas Corp Ltd and Oil India Ltd, which bore a last part of this subsidy, as it will leave more cash with the companies helping them, expedite exploration and production activities. Continued increase in crude oil prices would also lift sentiment for these companies. The Indian basket of crude oil is over $62 a barrel now, a gain of over $7 a barrel since March. A hike, though a regular affair now, will be sentimentally positive for the three stocks. However, trend for the week will depend on the broad market which is seen trading with a negative bias.

Oil Stocks Outlook for the week – 13 to 17.04.2015

Oil Stocks Outlook for the week – 13 to 17.04.2015

 ( www.rupeedesk.in )

Stocks of the state-owned oil companies are likely to track broad market on lack of near term

triggers and movements will be dictated mostly by news flow as focus shifts to companies reporting Jan-Mar earnings. Among the companies in the sector, only Reliance Industries will report earnings next week, that too after the end of trade on Friday. The refining and petrochemicals major may report buoyant profits for the quarter on the back of healthy margins despite a fall in crude oil and product prices.

Refining margins have been robust in the quarter ended March with the benchmark Singapore gross refining margin rising to $8.7/barrel from $6.3 in the previous quarter. The sharp uptick in margins is expected to more than offset the weakness in the company's upstream business, both the domestic and shale gas business in US. The company may post 15% sequential growth in its Jan-Mar bottomline.

RIL's shares may extend its positive run ahead of the earnings. The broad market, on the other hand, will track key economic data to be released next week, including headline inflation based on the Consumer Price Index for March.

For the state-owned oil retailers, the past few weeks have been good as crude oil prices have

remained stable around $55 a barrel and the Indian currency at around 62 for a dollar. Sharp

fluctuation in any of the two in the near term would have an impact on the stocks of Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd.

Oil Stocks Outlook for the Week – 06 to 10.04.2015

Oil Stocks Outlook for the Week – 06 to 10.04.2015

 ( www.rupeedesk.in )

Stocks of the state-owned oil marketing companies are expected to track broad market with

movements based mostly on news flow, when the market reopens next week after a long break, as there are no major triggers in the near term.

However, softening crude oil prices could keep stocks of Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd buoyant while weighing on stocks of Oil and Natural Gas Corp Ltd and Oil India Ltd. Oil prices have corrected nearly 7% in the second half of March and the Indian basket has dropped below $54 a barrel now after showing signs of recovery in the first half. Expectations of a settlement between the consortium of six countries and Iran on the latter's nuclear programme could further weigh on the commodity.

It is estimated that once the sanctions are lifted, Iran could soon more than double its oil production. Iran's production was restricted to 1 mln bpd versus 2.5 mln bpd prior to the sanctions. A 1.5 mln bpd addition would add 1.5% to global oil supplies.

The 7% downward revision in domestic gas prices last week would also weigh on sentiments and could keep the performance of upstream companies muted. The lower gas price would have negative impact of around 12 bln rupees and 1.3 bln rupees on estimated 2015-16 (Apr-Mar) earnings of ONGC and Oil India.

For Reliance Industries Ltd the impact on 2015-16 earnings is likely to be negligible due to declining stock of upstream earnings and also because KG-D6 gas prices is still stuck at $4.2 per mBtu.

For the oil marketing companies, the environment is improving as margins have expanded in recent weeks. The diesel margins have risen by 40% in the last fortnight. The 0.5 paise per litre cut in petrol prices and 1.2 rupees per litre reduction in diesel prices announced last week will not affect the margins of IOC, BPCL and HPCL significantly.

Oil Stocks Outlook for the week – 14 to 18.07.2014

Oil Stocks Outlook for the week – 14 to 18.07.2014

(www.rupeedesk.in)

Stocks of state-owned oil marketing companies are expected to stage a recovery next

week but trading may remain muted as focus shifts to companies reporting Apr-Jun

earnings.

In line with a weak trend in the broader markets, shares of Indian Oil Corp Ltd, Bharat

Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd declined sharply this week

despite the Union budget clearly indicating a shift towards decontrol of diesel prices and

reduction of subsidies on cooking gas.

During the week, price of the Indian basket of crude oil declined sharply to below $106 a

barrel while the exchange rate remained stable below the 60 rupees-a-dollar mark. The

effect of this could be factored in next week, resulting in some uptick in the shares of the

three companies. However, the extent of gains would be determined by the trend in the

broader market.

The oil ministry has already recommended reduction in subsidies on all fuels and a sharp

reduction in subsidy burden on the upstream oil companies till the time cooking gas and

kerosene are sold at below market rates.

Among the private sector companies, Reliance Industries Ltd may continue to face

pressure as its troubles with the government intensify. News flow on the company's battle

with the government on arbitration for KG-D6 gas pricing may provide direction to the

company's stocks.

The oil ministry has already indicated its unwillingness to extend a higher price of gas for

KG-D6 until the shortfall of gas produced over the last four years is met.Also, the

company has threatened that it will not make further investments in the block unless it

gets a higher price.

Oil Stocks Outlook for the week – 23 to 27.06.2014

Oil Stocks Outlook for the week – 23 to 27.06.2014
(www.rupeedesk.in)

As the crisis in Iraq continues to fuel global crude oil prices, shares of the public sector

oil companies may further decline next week. On Thursday, the price of India's crude oil

basket rose to a nine-month high of $111.94 a barrel in the wake of escalating tensions in

Iraq and concerns over likely supply disruption. India imports huge quantity of crude oil

from Iraq.

Stocks of oil marketing companies may also trade slightly lower on Monday as a result of

a 6.5% hike in rail freight rates announced yesterday. Oil marketing companies use

railways to transport a chunk of their petroleum products and crude. "It is yet to be seen if

the companies would pass on the impact to users or not," an official with one of the oil

marketing firms said.

However, the fall in the scrip of Indian Oil Corp, Bharat Petroleum Corp Ltd and

Hindustan Petroleum Corp Ltd may be cushioned if users are forced to bear the burden of

the freight hike.

The government has asked the oil marketing companies to prepare contingency plans,

including diversification of their resources, for import of crude oil in order to minimise

the impact of any geo-political instability. Stocks of upstream companies Reliance

Industries and Cairn India may rise with the likely increase in global crude oil prices.

State-owned exploration companies Oil and Natural Gas Corp and Oil India are likely to

get hit due to the rise in crude prices as it would also mean that they might have to share a

higher subsidy burden.

Stocks of capital goods companies are seen rangebound with a positive bias next week.

However, the sector could be impacted if overall market sentiment takes a hit on account

of the conflict in Iraq. Another factor influencing the market will be the rise in freight

cost.

Citing concerns over the Indian Railway's financial situation, the government yesterday

increased passenger rail fares by 14.2% and freight rates by 6.4%, effective Jun 25.

While this may negatively impact shares of cement, mining, metal, oil and gas, fertiliser,

and logistics companies the move may translate into long term gains for capital goodscompanies that have exposure to railway business such as KEC International, and Larsen

& Toubro.

Although the hike in fares and freight rates will impact inflation, the move is a positive

because it will help improve the financial situation of Indian Railways. With the help of

policy support, timely bureaucratic decision making and improving investor confidence,

the domestic capex cycle (which may have bottomed out in 2013) should strengthen in

the future.

Oil Stocks Outlook for the week – 16 to 20.06.2014

Oil Stocks Outlook for the week – 16 to 20.06.2014
(www.rupeedesk.in)

Stocks of oil-marketing companies may fall further next week after the companies led by

public sector oil retailers suffered losses in yesterday's trade. Stock prices of oilmarketing

companies took a hit as crude oil prices rose to a nine-month high due to

escalating geopolitical tensions in Iraq. Stocks may remain weak if the situation in Iraq

does not improve, which may affect oil supply from the country.

US President Barack Obama warned of a possible military intervention if the situation in

Iraq deteriorates. However, the fall in the stocks of Indian Oil Corp, Bharat Petroleum

Corp Ltd and Hindustan Petroleum Corp Ltd may be cushioned if they raise prices of

petrol over the weekend.

Stocks of private upstream companies Reliance Industries and Cairn India may gain with

the expected rise in global crude oil prices. State-owned exploration companies Oil and

Natural Gas Corp and Oil India may not be able to gain from the rise in crude prices on

fears that it could also translate to a higher share in their subsidy burden.

Oil Stocks Outlook for the week – 09 to 13.Jun.2014

Oil Stocks Outlook for the week – 09 to 13.Jun.2014
(www.rupeedesk.in)

After the massive gains accumulated this week, stocks of the state-owned oil companies

may take a breather in the five sessions but the overall trend will remain bullish on hopes

of big bang reforms to be implemented by the new government.

Oil and gas stocks surged on hope the government will soon approve the revised gas

prices under the formula cleared by the previous United Progressive Alliance

government, which could almost double the existing $4.2 per mBtu rate. Oil and Natural

Gas Corp Ltd and Reliance Industries Ltd will be the biggest beneficiaries of the move

resulting in the higher price for domestically-produced gas.

The new prices were to be implemented from Apr 1 but could not be notified because of

the elections and the new government is yet to take a call. The government could notify

the new prices as early as July.

A senior oil ministry official told reporters that clarity on key issues in the oil and gas

sectors, including revision of gas prices and pricing of subsidised fuels, will emerge next

week after senior officials of the ministry meet Prime Minister Narendra Modi.

The gas pricing issue will be on top of the oil ministry's presentation to Modi. Further

upside in these stocks would be incumbent upon a positive decision on gas prices which

are highly anticipated. The issue of pricing of subsidised fuels is another issue likely to be

taken up in the meeting. The new government has so far allowed Indian Oil Corp Ltd,

Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd to continue their monthly

diesel price hikes.

The revenue loss on diesel has declined to just 2.80 rupees an ltr now which could be

wiped out in less than six months if the hike continues. The final decision on the issue

will have to be taken by the Cabinet Committee on Political Affairs. All three stocks will

take directions from news flow on the matter and most market participants expect it to be

positive. Broadly, revenue losses of the oil marketing companies are likely to decline

sharply in the currently financial year which would improve their financial health

significantly. It will also help companies such as ONGC and Oil India that have to share

a large chunk of the subsidy burden.

We see diesel price decontrol in next six months. With possible pricing clarity coming

and reduction of diesel losses, we see higher net realisation for ONGC in FY16/FY17

Oil Stocks Outlook for the week – 26 to 30.05.2014

Oil Stocks Outlook for the week – 26 to 30.05.2014

(www.rupeedesk.in)

Stocks of state-owned oil marketing companies are seen in a narrow range in the coming

week, with all eyes set on companies' Jan-Mar results, rupee-dollar movement, and the

new government's views on fuel pricing. Indian Oil Corp Ltd, Bharat Petroleum Corp

Ltd, and Hindustan Petroleum Corp Ltd will detail Jan-Mar earnings on Wednesday and

Thursday.

The Ministry of Petroleum and Natural Gas has set the subsidy burden of the upstream oil

and gas companies at 670.21 bln rupees for 2013-14 (Apr-Mar), while the government

has provided 707.72 bln rupees as cash subsidy for the year. Public sector oil marketing

companies incurred a total revenue loss of around 1.40 trln rupees. The oil retailers are

now required to absorb 20.76 bln rupees as their part of subsidy share.

However, going back on its earlier decision to keep GAIL (India) Ltd out of the subsidy

web, the oil ministry has asked the company to now pay 19 bln rupees, 5 bln rupees more

than what has already been paid by the company. This is likely to be negative for the

stock and may weigh on it in the near term until the final position is clarified by the new

government.

For 2013-14, ONGC's subsidy burden has been set at 563.84 bln rupees and Oil India has

been asked to provide discounts to the tune of 87.37 bln rupees. The burden on ONGC

and Oil India is also higher than expected and could worry investors.

Meanwhile, the rupee has been consistently strengthening against the dollar, a positive

development for the oil marketing companies. Further appreciation could give more

upside to BPCL, IOC and HPCL shares. Also, the new government's stance on fuel

pricing, especially diesel will be key. If the government halts monthly diesel price hikes,

the stocks of these companies could take a hit.

Oil Stocks Outlook for the week - 19 to 23.May.2014

Oil Stocks Outlook for the week - 19 to 23.May.2014
(www.rupeedesk.in)

Stocks of oil companies may gain next week, but little upside from current

levels is seen, though a resounding win for the National Democratic Alliance in

the Lok Sabha elections is likely to keep Reliance Industries stocks

buoyant. We believe that a strong mandate for the NDA and Bharatiya Janata

Party will help the new government push key reforms and eliminate subsidies

that will improve financial health of the state-owned oil marketing companies--

Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd, and Hindustan Petroleum

Corp Ltd.

A clear majority would rather encourage the government to fast forward deregulation

process through more frequent hikes (fortnightly or weekly). It can

be more or less implied that de-regulation is for sure. The stocks would remain

on a high in the near term, at least until the new government outlines it policies

after taking charge. The rupee-dollar movement will be key for the near term

trend in the stocks of the three oil marketing companies. The Indian currency is

expected to remain firm, buoyed by the NDA win that will provide further

upside to IOC, BPCL and HPCL.

For Reliance, the Street is more hopeful of an improvement in environment as

the company has been at loggerheads with the United Progressive Alliance

government on several issues. Traders believe that the BJP government will try

to mend fences with corporates and fast-track dispute resolution with Reliance

Industries in a bid to improve investment environment for the upstream oil

industry. The government is also likely to go ahead with the gas price hike and

also provide a roadmap towards free pricing, which will be a big positive for

the company as well as the sector.

NDA government is expected to pay heed to concerns from E&P (exploration

and production) players for a roadmap towards free pricing of gas. Oil and

Natural Gas Corp too will benefit from reforms in the downstream sector as its

subsidy burden will decline, though a timeline for that is yet not clear.

However, upstream reforms will keep the counter upbeat as ONGC will be the

biggest beneficiary of higher gas prices.

Oil Stocks Outlook for the week - 05 to 09.May.2014

Oil Stocks Outlook for the week - 05 to 09.May.2014

Stocks of the state-owned oil refining and marketing firms as well as private sector

companies such as Reliance Industries Ltd are seen range bound next week with a

positive bias as elections near end.

The three oil marketing companies -- Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd

and Hindustan Petroleum Corp Ltd -- haven't increased diesel prices because of the

ongoing elections. It is expected that these companies may announce a hike of 50 paisa or

even a rupee in May, after elections are over.

The increase in diesel price will be sentimentally positive for the three stocks. Though it

is unlikely to be announced next week, expectations of a hike will provide support on

downside.

The intra-week movement will continue to take cues from rupee-dollar movement. The

Indian currency has gained some lost ground this week and ended close to the 60-for-adollar

mark. Further appreciation will help HPCL, IOC and BPCL stocks gain.

Also broad market trend will be a key. Most expect benchmark indices to trade in a range

next week but volatility may increase as market participants prepare themselves for May

16, when outcome for the general elections will be announced.

End of elections are also likely to have a bearing on the stock of Reliance Industries Ltd

as Oil Minister Veerappa Moily said this week that the new gas price -- almost double the

existing $4.2 per but -- will be notified immediately after the last phase of polling on May

12. There is, however, still a lot of uncertainty on the gas price as there are several cases

pending in court and several parties have come out openly against the move. The stock

will continue to move in tandem with news flow on the gas price issue as well as the

broad market trend.

(www.rupeedesk.in)

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Oil Stocks Outlook for the week - 17.02.2014 - 21.02.2014

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 Stocks of oil marketing are seen range bound next week with lack of near term triggers, but rupee-dollar movement and crude prices remain key while developments over gas pricing issue could continue to hold sway over Reliance Industries counter. Rupee rallied after close of equity markets yesterday ending below the psychologically important 62-dollar-a-rupee mark. Stocks of Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd could open up on Monday if Indian currency holds on to yesterday's closing level of 61.92 a dollar or gains further. 

However, gains will be capped over concerns that these companies may not be able to continue with their monthly 50 paise per litre diesel price hikes as general elections are approaching. However, senior official’s at all three companies are maintaining that the government is backing them with hikes and it is unlikely to stop. Every hike in diesel prices from now on would be a positive trigger for these stocks. The move will also aid upstream companies Oil and Natural Gas Corp Ltd and Oil India Ltd. On the other hand, stocks of Reliance Industries are also seen range bound with a negative bias with a low valuation seen as the only support for the stock. 

Delhi Chief Minister Arvind Kejriwal's first information report filed against the company getting a higher gas price from April and continuous battering of its promoter on charges of corruption and interfering in the government's functioning could continue to weigh on the stock. While the Union government has held on to its stand to allow the company a higher price from April, a probe and a Supreme Court case on the matter may keep investors away as the higher price is not seen having a major revenue booster at a time gas output from the KG-D6 continues to decline. Highlighting the fact, concerns are more on the falling volumes and the Kejriwal issue is only a sentimental impact. 

Oil Stocks Outlook for the week - 10.02.2014 - 14.02.2014

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Movement of stocks of state-owned oil marketing companies as well as upstream companies will depend on their Oct-Dec earnings to be announced next week, but will broadly be rangebound. While all three refiners are likely to report losses for the quarter ended December as the government has so far not announced any compensation for the revenue loss incurred on subsidised sale of fuels, the realisations of upstream companies would remain under pressure because of the subsidy burden. The oil ministry has sought 237.87 bln rupees as subsidy to part-finance the revenue losses faced by Indian Oil Corp, Bharat Petroleum Corp, and Hindustan Petroleum Corp in Oct-Dec. The three public sector-oil retailers are estimated to have faced revenue losses to the tune of 397.25 bln rupees during Oct-Dec, of which upstream companies--Oil and Natural Gas Corp and Oil India--will bear 159.37 bln rupees. Without the subsidy, BPCL may report a net loss of 14.8 bln rupees in Oct-Dec while HPCL and Indian Oil may report net loss of 25.52 bln rupees and 42.84 bln rupees, respectively. However, HPCL Chairman and Managing Director S. Roy Choudhury told Cogencis this week that the government may announce the subsidy this week. If announced the companies could report profits. ONGC's bottomline and gross realisation on crude oil would remain under pressure because of the high subsidy burden. The upstream major's net profit is seen declining 6% sequentially to 56.8 bln rupees in Oct- Dec. Also, crude oil prices have softened further with the price of Indian basket declining to $104.25 a barrel from $105.50 last week. The crude price trend has been soft this week with the Indian basket hitting a low of $103.6 a barrel. The rupee too has recovered against the US dollar and closed at 62.28 for a dollar this week, 40 paise higher from a week ago. Both these factors will provide crucial support to the stocks of oil companies.

Oil Stocks Outlook for the week - 03.02.2014 - 07.02.2014

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Having rallied yesterday on hopes of hike in diesel price, stocks of state-owned oil marketing companies may pare some gains next week though on Monday they are expected to open firm. Broadly, the stocks are seen in a range. Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd, and Hindustan Petroleum Corp Ltd increased diesel prices yesterday by around 50 paise a litre. After the government announced an increase in the number of subsidised cooking gas cylinders per family to 12 a year from nine earlier, sentiment for their stocks had turned negative as the already high subsidy burden will increase by 50 bln rupees. Also, the move gave rise to fears that the government may now force these companies to stop raising diesel prices every month as general elections are approaching. 

With yesterday's hike fears have receded for now, and the revenue loss on diesel has also declined to 7.40 rupees per litre from 9.24 rupees a month ago. The revenue loss has shrunk because of decline in crude oil prices in the last one month. Positive sentiment will also help shares of Oil and Natural Gas Corp Ltd
and Oil India Ltd as they bear a significant portion of the oil subsidies. However, rupee-dollar and crude price movements would continue to dictate the trend of shares of the state-owned oil majors as well as the broad market. The rupee pulled back this week to end at 62.68 a dollar after hitting a low of 63.29 per dollar on Monday. 

Movement in USD-INR (dollar-rupee) will now take centre stage. An upward rise in USD-INR will restrict market's rise and can result in selling pressure. Indian crude basket price has remained steady around $105 a barrel, but most analysts believe the commodity will trend lower in coming months as demand eases after winters. 

Oil Stocks Outlook for the week - 27.01.2014 - 31.01.2014

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The sudden decline in the rupee vis-a-vis the dollar after market hours today is expected to weigh on the shares of the three state-owned marketing companies when stock markets open on Monday. The stocks of Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd are likely to open down 2-3% on Monday but the course through the rest of the week will depend on the rupee-dollar movement going forward.
    
The Indian currency fell sharply today to close at 62.66 a dollar, a fall of 1.2% from yesterday's close. The decline was severe after the close of the stock market. USD-INR (dollar-rupee) on Friday witnessed higher movement in the opening and (the) pair managed to breach 62.50 during the day with importers' demand and weaker Chinese data. However, we believe the Indian currency will regain some strength on Monday, in which case decline in the stocks of the oil companies would be limited.
    
Crude oil prices would also be monitored closely in the near term, as prices have remained soft over the past few days. The price of Indian basket of crude has hovered around $105 a barrel in January so far, compared with the average price of $108 per barrel in December.
    
However, the government's plan to increase the cap on subsidised cooking gas cylinders available to a family per year to 12, from 9 now, is a concern that will weigh on these shares. Oil companies are scheduled to announce their monthly diesel price hike on Friday. Most market participants believe that the monthly 50 paise a litre hike will be put on hold ahead of elections. However, the government has so far maintained that the companies won't be forced to curb diesel price hikes as the revenue loss on diesel still remains high at around 9.50 rupees a litre.
    
But, an increase in the cap on subsidised liquefied petroleum gas cylinders would be seen as a setback for the deregulation initiative taken by the government and may raise fear that the government will do away with the unpopular diesel hikes as well. Stocks of these three companies will remain subdued in the near term because of these concerns.(Bpcl, Hpcl, ONGC).

Oil Stocks Outlook for the week - 13.01.2014 - 17.01.2014

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Stocks of state-owned oil marketing companies are likely to remain subdued next week as those reporting earnings will come into focus, but rupee's movement against the dollar and crude oil prices will continue to determine the trend. Reliance Industries is the only one in the sector that will report Oct-Dec earnings next week, but its numbers will be announced only post market hours Friday. The refining behemoth is expected to report 3% year-on-year and quarter-on-quarter decline in net profit for the quarter ended December at 53.21 bln rupees while its turnover may grow 12% from the year-ago period to 1.05 trln rupees. The stock is broadly seen positive as we expect an uptrend in the company's business cycle with production from the KG-D6 block expected to pick up from its lows. The government's decision to allow the company benefits of the higher gas price effective from April will further boost earnings from the segment. A combination of downstream expansions, E&P (exploration and production) volume growth and higher gas price will drive Reliance's US$ EBITDA (earnings before interest, tax, depreciation and amortisation) to double in three years. On the other hand, crude oil prices have softened a bit since the beginning of January while the rupee has continued to remain stable, which will provide some relief to the state-owned oil marketing companies. The stocks are seen closely tracking the commodity and Indian currency in the near term.

Oil Stocks Outlook for the week - 30.12.2013 - 03.01.2014

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Stocks of state-owned oil marketing companies are likely to be rangebound next week and will mostly track the dollar/rupee movement while stocks of upstream major Oil and Natural Gas Corp may remain under pressure due to shutdown of its operations in South Sudan. The Indian currency may come under pressure early in the week due to the usual month-end dollar demand from importers but broadly it is expected to trade around 62 rupees per dollar level through the week. On the other hand, international crude oil prices are expected to soften in 2014 as the demand scenario looks weak in the major economies. The US Energy Information Administration expects Brent crude oil price to decline gradually to $104 per barrel in 2014 from around $112 now. 

In the shorter term, crude oil prices may remain stable. The state-owned oil marketing companies are still losing significantly on subsidised fuels, with the revenue loss on diesel at an astounding 10.5 rupees a litre despite sustained price hikes during the year. With the general elections around the corner, the market suspects whether the monthly price hike of 50 paise a litre in diesel will continue. The next hike is due on Dec 31, and an announcement in this regard will be keenly awaited. If oil companies continue to hike diesel price, it will give some positive momentum to stocks of Indian Oil Corp, Bharat Petroleum Corp, and Hindustan Petroleum Corp. 

A hike will also help stocks of ONGC and Oil India. ONGC's overseas arm ONGC Videsh was forced to suspend operations in its oilfields in South Sudan last week as the local unrest intensified. ONGC Videsh operates two producing assets in South Sudan through its joint operating companies, Greater Pioneer Operating Co and SUDD Petroleum Operating Co, with participating interest of 25% and 24.125%, respectively. Greater Pioneer Operating Co was producing around 37,000 bbl per day in which ONGC Videsh's share is 9,250 bpd from Block 1,2,4. SUDD Petroleum Operating Co produces around 4,600 bpd where ONGC Videsh's share is 1,100 bpd from Block 5A. A prolonged shutdown will mean loss of revenue and the stock may come under pressure. 

Oil Stocks Outlook for the week - 23.12.2013 - 27.12.2013

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 Stocks of major oil and gas companies are likely to gain next week, due to a positive sentiment after the 0.41-rupee-per-ltr hike in petrol price announced late Friday. Though the price increase is not significant, as it includes 21-paise-per-ltr hike in dealer commission, it will help the sentiment move in favour of oil retailers. The price of diesel will also go up as the government raised dealers commission on the fuel, too, by 0.10 rupees per ltr.

Stocks of upstream companies have already received a boost after the Cabinet Committee on Economic Affairs Thursday gave its final approval to the increase in gas prices from April and turned down a proposal to cap the prices of domestically produced natural gas. The main beneficiary of the decisions taken by the Cabinet panel on Thursday was Reliance Industries Ltd that was allowed to reap the benefits of the new gas pricing mechanism from April after depositing quarterly bank guarantees till issues around the decline in output from its KG-D6 blocks were sorted. However, profit booking will limit any strong movement in the scrips of the upstream companies next week.

Oil Stocks Outlook for the week - 16.12.2013 - 20.12.2013

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Shares of state-owned oil marketing companies as well as upstream companies are seen range bound next week but the broad market trend will be a key factor. Rupee-dollar movement as well as crude oil prices will continue to be the drivers of shares of the three public sector refiners, Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd, and Hindustan Petroleum Corp Ltd. While crude oil prices softened this week, the rupee reversed trend and slid from near 61 for a dollar mark early in the week to end at 62.12 per dollar. The oil minister's announcement that the government is looking to partially roll back the decontrol of pricing of bulk diesel sales would also weigh on the shares. The stock markets as well as the rupee are seen choppy next week ahead of the Reserve Bank of India's mid-quarter policy review Wednesday. Despite its recent strengthening, the rupee remains prone to multiple unpredictable macroeconomic factors, India Ratings said in a report recently adding that chance of a badly-needed steep hike in diesel price is very low. On the other hand, rising revenue losses of the oil marketing companies and pressure to keep the fiscal deficit under control, may force the government to increase the burden on the upstream companies. The fears of a further rise in subsidy burden in 2013-14 (Apr-Mar) will continue to weigh on the shares of Oil and Natural Gas Corp Ltd and Oil India Ltd. Reliance Industries is unlikely to gain much from current levels until the government announces a decision on implementing the new gas price formula for the company's KGD6