Brokerages positive on OMCs driven by expectation of policy continuity
HSBC's latest note emphasises their confidence in the sustained policy approach for the oil and gas sector. However, they caution that the pace of significant reforms might be slower than initially anticipated.
Oil Marketing Companies (OMCs) were buzzing in trade on Wednesday, June 12, driven by investor confidence following Hardeep Singh Puri taking charge as the head of the Ministry of Petroleum and Natural Gas. Analysts at HSBC have expressed optimism, expecting policy continuity under his leadership, which is reassuring for the sector.
In the past few days, multiple brokerage reports have been released, and the general consensus is positive regarding the policy direction.
HSBC's latest note emphasises their confidence in the sustained policy approach for the oil and gas sector. However, they caution that the pace of significant reforms might be slower than initially anticipated.
A key factor that could influence the sector is the persistence of low oil prices. HSBC's positive outlook on OMC stocks is based on the assumption that oil prices will remain below the $85 per barrel mark. This moderated price level is crucial for maintaining the positive momentum in the sector.
Despite a slowdown in oil demand growth in May, the marketing margins for OMCs have shown considerable strength. Gross refining margins (GRMs) have softened, falling to the $3-$4 per barrel range over the past week. Conversely, marketing margins have improved significantly, rising to ₹5-7 per litre, compared to ₹4-5 per litre in Q4.
Petrochemical spreads, however, continue to face challenges due to weak demand from China. Despite this, HSBC maintains a positive outlook on OMCs, bolstered by improved marketing margins and the expectation of sustained low oil prices.
In the past few days, multiple brokerage reports have been released, and the general consensus is positive regarding the policy direction.
HSBC's latest note emphasises their confidence in the sustained policy approach for the oil and gas sector. However, they caution that the pace of significant reforms might be slower than initially anticipated.
A key factor that could influence the sector is the persistence of low oil prices. HSBC's positive outlook on OMC stocks is based on the assumption that oil prices will remain below the $85 per barrel mark. This moderated price level is crucial for maintaining the positive momentum in the sector.
Despite a slowdown in oil demand growth in May, the marketing margins for OMCs have shown considerable strength. Gross refining margins (GRMs) have softened, falling to the $3-$4 per barrel range over the past week. Conversely, marketing margins have improved significantly, rising to ₹5-7 per litre, compared to ₹4-5 per litre in Q4.
Petrochemical spreads, however, continue to face challenges due to weak demand from China. Despite this, HSBC maintains a positive outlook on OMCs, bolstered by improved marketing margins and the expectation of sustained low oil prices.
(Edited by : Swapnil Deshpande)
Check out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!
