www.rupeedesk.in
With crude oil prices inching marginally higher and the rupee continuing to weaken against the dollar, stocks of state-owned refiners may continue to remain subdued in the near term. Weakening of global refining margins may also put pressure on stocks of the three state-owned oil-marketing companies Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corp Ltd. The three companies are estimated to lose 4.12 bln rupees daily, during the fortnight starting yesterday, on sale of subsidised fuels. While the estimated loss is slightly lower than the 4.21-bln-rupee loss they incurred daily in the previous fortnight, the situation is expected to worsen going forward. The fuel retailers' revenue loss for the current fortnight is calculated on the basis of international crude oil and petroleum product prices over the previous 15 days.
The Indian basket of crude reversed its declining trend to gain almost $2 a barrel this week. On Thursday, the Indian basket of crude cost $107.92 a barrel.
At the same time, the rupee fell to 55.16 a dollar yesterday from 54.75 last week. Also, over the last one-month global complex refining margins have weakened because of shrinking product spreads. Structurally refining cycle is expected to remain weak with incremental net refining capacity additions. Additional refining capacity to the tune of 1 mln barrels per day will come up in 2012 and 1.3 mln barrels per day in 2013. Demand for oil products is seen growing by only 800,000 barrels per day in 2012 and 1 mln barrels per day in 2013, putting further pressure on refining margins. This is likely to weigh more on shares of private sector refiners such as Reliance Industries and Essar Oil. Shares of Reliance Industries, which derives almost 75% of its revenues from refining, are seen weak in the near term.
However, news related to developments on further drilling in KG-D6 will continue to dictate the movement in the stocks of Reliance Industries. The company plans to start drilling immediately for developing a new field in KG-D6 after it got the approval of the oil ministry.
