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Informist, Friday, Feb. 7, 2025

MUMBAI – The near-term outlook for the shares of oil marketing companies is negative with a possible rise in global crude oil and liquefied natural gas prices and further depreciation of the rupee. Crude oil prices have given up most of the gains made since the beginning of 2025, but prices could rise this month on uncertainty around US President Donald Trump's tariff policies and increasing pressure against Iran and Russia.

The US president Tuesday reimposed maximum "economic pressure" on Iran by sanctioning enforcement mechanisms on those acting in violation of existing sanctions, and plans to drive Iran's oil exports down to zero. This could create a supply gap in the crude oil market and push up prices. "Trump has issued a directive that aims to ramp up economic pressure on Iran. This could see it (the US) target Iran's exports of crude, which are currently around 1.5 million barrels per day, according to ship tracking data," said Daniel Hynes, senior commodity strategist at ANZ Research, in a note.

This move will act against Trump's stated aim of reducing global crude oil prices. The Organization of the Petroleum Exporting Countries will have to increase its production drastically to offset any potential Iranian losses, which seems unlikely. On Monday, the joint ministerial monitoring committee of OPEC stuck to its policy of increasing production from April in a phased manner.

In retaliation to tariffs imposed by the US, China has imposed tariffs of 15% on imports of US liquefied natural gas and 10% on imports of US crude oil. As of Nov. 6, Dutch TTF natural gas futures have surged 5% to 54 euros per megawatt-hour. The surge in prices of crude oil and natural gas will have an impact on the refining margins of oil marketing companies. The refiners' margins will be further impacted by the possible erosion of the discounted crude from Russia in the coming months. Bharat Petroleum Corp. is yet to receive Russian crude cargoes in sufficient numbers for March delivery, the company had said in a post-earnings analyst conference call.

During the week, the rupee hit a fresh all-time low of INR 87.58 per dollar. The rise in crude oil prices and depreciation of the rupee will hit oil marketing companies, whose key raw material is crude oil, which is mostly imported.

On the earnings front, Oil India announced its results Friday. The company reported a net profit of INR 12.22, down 23% on year. The company's revenue fell 10% on year to INR 52.40 billion. 

On Friday, the Nifty Oil & Gas index closed 0.9% lower at 10498.95 points. Bharat Petroleum, Reliance Industries, and Oil India were the major stocks in the index that rose during the week. Oil and Natural Gas Corp. was the major laggard over the week.  

TOP HEADLINES
* Oil cos seek 1.64 bln ltr ethanol in Feb-Jul; 97% to come from FCI rice
* PRESS: RIL to invest additional INR 500 bln in West Bengal by 2030
* Earnings Outlook: Flat sales volume to dent Oil India's Oct-Dec profit
* Coal ministry announces selected applicants under financial incentive scheme
* India's Apr-Jan coal production rises 5.9% YoY; Jan output up 4.4% on year
 

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 Akshay V. Johnson
Edited by Akul Nishant Akhoury

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