Oil Stocks Outlook: PSU retailers to track crude movement next wk

[B. Karthick]

Oil Stocks Outlook: PSU retailers to track crude movement next wk
Saturday, Aug 30

We expect crude oil prices next week will hold the key for
movement of shares of state-run oil marketing companies.
If the crude oil prices ease or remains at current levels, state-
run oil retailing stocks may hold on to the gains logged this week.
However, we feel that crude oil prices are likely to remain
volatile next week due to progress of tropical storm in Atlantic
Ocean.
Tropical storm Gustav is expected to strengthen into a hurricane
and threaten the Gulf of Mexico region, which accounts for 40% of the
U.S. refining capacity and produces 25% of the country's oil.
The benchmark NYMEX crude oil contract for October delivery was
today trading $1.45 per barrel higher at $117.04.
Recent cooling off in crude oil prices has resulted in sharp
decline in gross revenue losses of the state-run fuel retailers, who
sell petroleum products at government-regulated prices.
The three state-owned oil marketing firms--Indian Oil Corporation
Ltd, Hindustan Petroleum Corporation Ltd. and Bharat Petroleum
Corporation Ltd--are estimated to incur 66.7 bln rupees losses during
the fortnight started Aug 16, down from 90.3 bln rupees lost in the
preceding fortnight.
In the upstream sector, state-run Oil and Natural Gas Corporation
Ltd is likely to extend its gains on rising possibility of acquiring
UK-based Imperial Energy.
Reports suggest that China Petroleum & Chemical Corp, or Sinopec,
has decided to withdraw from the race for acquiring Imperial Energy, a
move that paves the way for ONGC Videsh Ltd, the overseas investment
arm of ONGC, to acquire the London Stock Exchange listed oil and gas
explorer.
Reports also said that Russian President Dmitry Medvedev Thursday
supported OVL's $2.58 bln takeover bid of Imperial.
The acquisition will be a major boost for ONGC's resources and is
a positive for the stock.
Imperial currently has proved and probable reserves of 920 mln
barrels of oil equivalent, over 350 km of newly laid pipelines with
supporting oil processing facilities, and production targeting 25,000
barrels oil per day by year-end.

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
Aug 29 Aug 22

Oil and Natural Gas Corp 1,023.25 1,019.20
0.4
Indian Oil Corp 401.35 395.65
1.4
Bharat Petroleum Corp 302.75 292.95
3.3
Hindustan Petroleum Corp 201.50 199.70
0.9
Reliance Industries 2,136.20 2,244.80
-4.8
Cairn India 248.50 247.15
0.5

Nifty 4360.00 4327.45
0.7
Sensex 14564.53 14401.49
1.1

End

B.Karthick
Research Analyst.