Monday, 21 December 2015

Crude Oil will lift Reliance and overall gross refining margins

Outlook of oil sector :

Our top pick: Reliance industries
Buy zone existed between 990 to 965 add more at every dip .

Your stop loss 920

Targets 1032 1172 1284 ultimate target 1320 ( hold just 2 to 3 months )

Shares of oil and gas production companies Oil and Natural Gas Corp Ltd and Oil India Ltd may come under pressure next week as crude prices continue to slide hitting all time lows.

Experts are predicting as :

This could mean a prolonged pressure on oil prices, which will bleed producers like ONGC and Oil India.
"Given the environment, where crude oil prices see-saw the cost of production, OIL (Oil India) is likely to face challenge to remain operationally profitable in case crude oil slips further. There is a possibility to slide below 400.

Trading volumes are seen muted this week ahead of the Christmas holiday season in most western countries and a curtailed trading week in India with Friday being a holiday due to Christmas.

Shares of oil marketing companies Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd and Hindustan Petroleum Corp Ltd are also seen under pressure despite an improvement in refining margins this quarter.

The sharp fall in crude and product prices in Oct-Dec may result in inventory losses for these companies with IOC seen as the worst affected as it maintains around 45 days of inventory compared with 22-25 days of HPCL and BPCL. The Indian basket of oil has averaged $43 in Oct-Dec, compared with $50 in Jul-Sep, but the fall has been sharper in recent weeks.

At the same time , the above negative situations are became (turned as) great positive for Indian Giant Reliance Industries .

Reliance Industries Ltd is likely to benefit the most from the robust refining margins. Increasing demand for products, especially naphtha, petrol and diesel will lift overall gross refining margins -- more so for complex refinery.