The Hindu Business Line : Uncertainty over oil bond issue drags oil marketing companies

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Uncertainty over oil bond issue drags oil marketing companies

Pratim Ranjan Bose
Jayanta Mallick

Kolkata, Aug. 17 In tune with the overall market mood the oil stocks, except Reliance Industries, a diversified player, dropped today on the bourses. The decline, according to market analysts and industry experts, was particularly pronounced in PSU oil marketing counters IOC, HPCL and BPCL. However, ONGC and GAIL also lost ground albeit for different reasons.

Among the refining stocks HPCL witnessed the sharpest fall by 8.57 per cent followed by IOC (3.57 per cent) and BPCL (2.53 per cent). Upstream stocks like ONGC and GAIL recorded losses of 4.41 per cent and 4.48 per cent respectively.

Industry sources felt that uncertainties over the issue of oil bonds by the Union government vis-À-vis the drop in refining margin and a depreciating trend of rupee exchange rate, particularly against dollar, might have impacted the investor sentiments.

Refining margin dropped drastically in July and August. IOC the largest refiner in the country is witnessing 40 per cent drop in GRM to $ 6.6 a barrel in August compared to $ 10.5 a barrel in June.

On Thursday, rupee, which is on the rise for last one week, finished at Rs 41.15 a dollar .

Analysts, however, felt that there was no clear fundamental reason behind the depreciation in ONGC and GAIL value. “The depreciating rupee is expected to help both,” said an analyst with an institutional brokerage.

On the other hand, experts felt that high crude oil prices should improve sentiment for ONGC as it benefits the PSU’s sales value. Crude oil prices (NYMEX Brent) rebounded on Friday by $1 a barrel to $ 72, primarily owing to strengthening of a hurricane, headed towards the Gulf of Mexico. (The offshore fields contribute to more than a quarter of US oil output.)

“The factor, which may have also contributed to the fall in the case of upstream PSU oil stocks, is continuation of a government policy forcing ONGC and GAIL to share the losses incurred by the downstream companies in auto-fuel marketing”, another oil analyst said.

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