Oil Stocks Outlook for the week – 17. to 21.04.2017
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Oil Stocks Outlook for the week – 17. to 21.04.2017
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Backed by robust fundamentals and a strong trend on charts, shares of public sector oil refining and retiling companies--Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd, and Hindustan Petroleum Corp Ltd-- are likely to move higher next week. These stocks have been in a rising trend for a fortnight now and reports of positive developments at the policy level, such as a possible move towards daily revision in fuel prices, have made them more buoyant. These three companies are backed by strong fundamentals, including rising domestic demand for fuels and robust refining and marketing margins, which lends them a generally positive fundamental outlook for the medium to long term. In the absence of any major sectoral triggers, crude oil prices, news flow and the broad market sentiment could impact the shares of oil companies. According to industry sources, the three public sector fuel retailers plan to move to daily price revisions and are likely to launch a pilot run for this in five cities--Chandigarh, Udaipur, Jamshedpur, Visakhapatnam, and Pondicherry. Any further development on this front could impact the stocks of these Companies. As for prices of crude oil, they are likely to continue strengthening for the second week running, after witnessing weakness over the previous few weeks. Geopolitical concerns and expectation that major exporters will extend their deal to cut production to the second half of 2017 are likely to keep crude oil prices in the green on the global and domestic exchanges next week. According to media reports, Saudi Arabia has sought to extend the production cut deal from other members of Organization of the Petroleum Exporting Countries. Production at Libya's largest oil field Sharara has been halted after the country's militia blocked the pipelines connecting the oil terminal. This is also a positive for the crude oil prices. Strong demand from China--one of the leading consumers of the world will also keep crude prices buoyed next week. Customs data showed that China imported a record 38.95 mln tn of crude in March, up 19% on year, dethroning the US to become the largest importer in the world. Stocks of upstream players such as Oil and Natural Gas Corp Ltd and Oil India Ltd, may derive some positivity from the renewed strength in oil prices. But the gains may be capped, given they are bound to be hit by a weaker dollar against the rupee. This is because these companies price oil and gas in dollars and a weaker greenback means lower 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. As far as technical charts are concerned, the three state-owned oil marketing companies are likely to trade with a positive bias next week, with Indian Oil being the top pick among the three scrips.
Source : Cogencis Information Services Ltd.
