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Informist, Friday, Oct. 11, 2024

MUMBAI - Shares of Indian oil companies are likely to remain lower for the third week in a row on expectations of negative earnings growth and with the conflict in West Asia unlikely to be resolved soon. The movement in global crude oil prices will be tracked to identify the share price movements of upstream and downstream companies in India. At 2051 IST, the Brent Crude futures contract on the Intercontinental Exchange was down 0.4% at $79.11 per barrel, which is sharply higher than the $69.91 per barrel it hit at the beginning of the month. 

The continuing tension between Iran and Israel pushed crude oil prices higher as it raised concerns about global supply. There have been reports that Israel plans to attack oil facilities in Iran in response to Tehran's missile barrage last week after the leader of the Islamic republic's proxy Hezbollah was killed in an Israeli bombing attack on Lebanon. Iran, a member of the Organization of the Petroleum Exporting Countries, is the third-largest oil producer in the cartel and produces about 3% of the world's oil output.

Any surge in crude oil prices would hit the refining margins of oil marketing companies, compressing their profits. On the other hand, a rise in crude oil prices helps upstream companies sell their output at a higher price, expanding their margins.

Oil companies are expected to have underperformed other sectors in Jul-Sept in terms of earnings growth. Oil and gas is one of only two sectors, the other being cement, expected to report an on-year decline in net profits and revenue, according to an Informist poll of 20 brokerages. The net profit of oil and gas companies in the Nifty 200 index is seen falling 34% on year and revenue falling 2%, the poll showed. 

Weak refining margins are likely to drag down the largest segment of Reliance Industries Ltd., oil-to-chemicals, which may lead to an on-year decline in the company's bottom line. The oil-to-telecom conglomerate, scheduled to release its Jul-Sept results Monday, is likely to post a 10% fall in consolidated net profit from the previous year to INR 156.94 billion, according to an average of estimates by nine brokerages. The company's revenue is seen rising just 1% to INR 2.35 trillion. On Friday, the company's shares closed 0.1% higher at INR 2,744.20 on the National Stock Exchange.

The Nifty Oil & Gas index closed 0.5% higher at 12306.55 points, with eight of its 15 constituents up. Except for Indian Oil Corp. Ltd., all oil constituents of the index closed higher. 

TOP HEADLINES
* Earnings Outlook: RIL's consol PAT may fall 10% YoY on weak refining margins
* EIA sees crude prices falling till 2025-end on low global demand growth
* PRESS: Govt to lease out crude oil storage to cos amid W Asia tensions

Following are the resistance and support levels for the sector's key stocks for next week, as per calculations based on their prices on the National Stock Exchange:

End

Reported by Anjana Therese Antony
Edited by Rajeev Pai

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