Oil Stocks Outlook: Positive next week on falling crude oil prices

[B. Karthick]

Oil Stocks Outlook: Positive next week on falling crude oil prices

Shares of state-run oil marketing companies are expected to move in
the positive territory due to the sustained fall in global crude oil
prices.
They (shares of oil companies) should not fall further. They have
already been hammered a lot in the past.

India crude oil basket Thursday slipped to $95.79 per barrel (about
4,400 rupees), it’s lowest since Feb 29, in line with fall in global
prices. Tracking the declining global crude oil prices, the Indian
basket has fallen about 33% per barrel since July, when it had touched
a record high of $142.04 per barrel.

The government yesterday said quantum of bonds to be issued to state-
owned oil marketing companies this year may be lower than earlier
expected 940 bln rupees if crude oil prices continue to fall.

At current crude prices, the under-recoveries or revenue losses of
state-owned oil companies in 2008-09 (Apr-Mar) is likely to be 1.62
trln rupees, sharply lower than the initial estimates of 2.45 trln,
Petroleum Secretary R.S. Pandey said. Fall in under-recoveries is
definitely going to trigger interest in shares of oil companies.

However, Pandey yesterday said the recent fall in rupee against the
dollar may adversely affect revenue losses, as the imports become
costlier.

The rupee has fallen 12% against the dollar since beginning of the
current financial year.

Exchange rate is a concern but there is scope for improvement, which
will give some more breathing space to oil companies.

We expect shares of upstream company Oil Natural Gas Corp Ltd to be in
the limelight next week as its overseas arm ONGC Videsh is expected to
clinch the deal to acquire London Stock Exchange-listed Imperial
Energy.

ONGC Videsh has placed $2.5-bln bids for London-based Imperial
Energy.

Shares of Reliance Industries, which closed below 2,000 rupees level,
are expected to remain subdued on lack of clarity on several issues
including the timing of commencement of gas production from the D-6
block in the Krishna-Godavari basin.

Following are this week's closing share prices, in rupees, of leading
oil companies on National Stock Exchange compared with previous week:

Company Closing price Closing price % Change
Sep 12 Sep 5
Oil and Natural Gas Corp 1022.80 1071.95 -4.6
Indian Oil Corp 406.70 446.45 -8.9
Bharat Petroleum Corp 345.35 358.65 -3.7
Hindustan Petroleum Corp 233.35 236.50 -1.3
Reliance Industries 1931.40 2080.90 -7.2
Cairn India 211.90 228.95 -7.4
Nifty 4228.45 4352.30 -2.8
Sensex 14000.81 14483.83 -3.3

B.Karthick
Research Analyst.