Oil Stocks Outlook for the Week – 27.02.2017 to 03.03.2017
Oil Stocks Outlook for the Week – 27.02.2017 to 03.03.2017
( www.rupeedesk.in )
Stocks of public sector oil refining and marketing companies--Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd, and Hindustan Petroleum Corp Ltd--are likely to remain range-bound next week, even as underlying sentiment for these stocks remains positive. The three stocks are backed by strong fundamentals, including an increase in domestic demand for fuel and strong refining and marketing margins. Prices of crude oil have appreciated in the past two-and-ahalf months, and this has helped stocks of upstream companies such as Oil and Natural Gas Corp Ltd, Cairn India Ltd, and Oil India Ltd. The outlook for upstream companies also remains positive in the immediate- to-near term, as the newfound strength in crude oil prices has not waned and prices seem to be stabilising around $55 a barrel. In the absence of any major triggers, movement in stocks of oil companies is likely to be influenced by price of crude oil, news flow, and sentiment in the broader market. The rise in prices of crude oil followed the decision of the Organization of the Petroleum Exporting Countries to cut output by 1.8 mln barrels per day in the first six months of 2017. It was further aided by major non-OPEC producers agreeing to cut output by 558,000 bpd to help trim global glut. Though the rise in crude oil prices will increase input cost for refiners, they are set to benefit from inventory gains due to the spike, as was evident from Oct-Dec earnings of refining companies. Also, given that prices of most fuels are now market-linked, the downside of higher prices for these companies seems limited for the time being. According to tracking crude oil, futures contracts of the commodity are likely to trade in a narrow range with a positive bias, in the next five-six sessions. Investors will weigh reports of major producers extending output cuts into the second half of the calendar year amid rising supply in the US. According to the International Energy Agency, OPEC members have reached 90% compliance with their agreed output cut. There is a production spree in the US going forward, prices will depend on who is willing to give up output. Any major fluctuation in the dollar-rupee exchange rate could also affect stocks of oil companies. A weaker rupee will benefit upstream companies, as they sell oil and gas in dollars but refiners tend to lose if the greenback strengthens, as their outgo on buying oil and gas will increase.
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Oil Stocks Outlook for the Week – 27.02.2017 to 03.03.2017
( www.rupeedesk.in )
Stocks of public sector oil refining and marketing companies--Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd, and Hindustan Petroleum Corp Ltd--are likely to remain range-bound next week, even as underlying sentiment for these stocks remains positive. The three stocks are backed by strong fundamentals, including an increase in domestic demand for fuel and strong refining and marketing margins. Prices of crude oil have appreciated in the past two-and-ahalf months, and this has helped stocks of upstream companies such as Oil and Natural Gas Corp Ltd, Cairn India Ltd, and Oil India Ltd. The outlook for upstream companies also remains positive in the immediate- to-near term, as the newfound strength in crude oil prices has not waned and prices seem to be stabilising around $55 a barrel. In the absence of any major triggers, movement in stocks of oil companies is likely to be influenced by price of crude oil, news flow, and sentiment in the broader market. The rise in prices of crude oil followed the decision of the Organization of the Petroleum Exporting Countries to cut output by 1.8 mln barrels per day in the first six months of 2017. It was further aided by major non-OPEC producers agreeing to cut output by 558,000 bpd to help trim global glut. Though the rise in crude oil prices will increase input cost for refiners, they are set to benefit from inventory gains due to the spike, as was evident from Oct-Dec earnings of refining companies. Also, given that prices of most fuels are now market-linked, the downside of higher prices for these companies seems limited for the time being. According to tracking crude oil, futures contracts of the commodity are likely to trade in a narrow range with a positive bias, in the next five-six sessions. Investors will weigh reports of major producers extending output cuts into the second half of the calendar year amid rising supply in the US. According to the International Energy Agency, OPEC members have reached 90% compliance with their agreed output cut. There is a production spree in the US going forward, prices will depend on who is willing to give up output. Any major fluctuation in the dollar-rupee exchange rate could also affect stocks of oil companies. A weaker rupee will benefit upstream companies, as they sell oil and gas in dollars but refiners tend to lose if the greenback strengthens, as their outgo on buying oil and gas will increase.