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GASOLINE: The oil & gas monthly - January 2011
- This month we have also summarized the key sector developments in the year gone by, in respect of (A) Refining, (B) Petchem, (C) Upstream, and (D) Policy.
- Brent crude crossed US$94/bbl during Dec-10, led by positive outlook for global oil demand, weak dollar and continued QE2, higher price expectation.
- MoM uptick in GRM was led by increase in gasoline and FO cracks. 3QFY11 GRM average at US$5.5/bbl (+31% QoQ and +90% YoY).
- Going forward, with increased utilization, we expect low cost Middle East producers to marginally dampen petchem margins.
- Valuation and view: 1) Upstream: pure plays like Cairn to gain at higher oil prices; however, overhang of Vedanta deal continues, 2) Refining: higher GRM and improving light-heavy differentials to benefit global scale refiners like RIL the most (will offset recent E&P disappointment), 3) Petchem: continued strong performance by RIL and GAIL, 4) OMCs: subsidy sharing and timing of diesel deregulation is an overhang on OMCs and upstream PSU companies.
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