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OIL & GAS INDUSTRY OVERVIEW
Key observations
Uncertainty and fear driving the oil price higher.
Brent crude oil price surged to USD$120/bbls (05th April'11), the key factors
supporting the oil prices are the prolonged disruption in Libya, Bahrain,
Yemen, Syria, concern of unrest spreading to other oil rich countries such as
Saudi Arabia (second largest crude producer today, after Russia) and dollar
depreciation.
We believe the two major events influencing the oil price in the short term
are disruption in Libya (supply side) and devastating tsunami in Japan
(demand side). We expect the implication will be two-tiered. First, the
disaster will cause a temporary reduction in Japanese oil demand, partly
offsetting the Libyan supply shortfall, Second, in the longer term it is
expected that the Japanese disaster will cause oil demand to rebound when
they get underway reconstruction efforts to partly cover the losses from
nuclear power generation.
In Mar'11, OPEC total crude oil supply decreased by 143k bopd (YoY) to 29.02 Mn
bopd with Libya's crude supply falling by 1.135 Mn bopd (YoY) to 390k bopd,
Angola's supply falls by 185k bopd (YoY) to 1.75 Mn bopd.
On the other hand, due to the loss of refining capacity in Japan (two refineries with
capacity of ~4.5 Mn bopd are shut) the price of refined products has increased as a
result world over refiners is seeing their gross refining margins improving. In
March'11, the Singapore refining margin has improved by 16.5% (MoM) to
USD$7.2/bbls, similarly, Gas oil price has increased by 11.6% (MoM) to USD$133.4/
bbls, followed by Naphtha price increased by 9.9% (MoM) to USD$107.4/bbls.
We believe rising crude oil price will lead to higher under-recoveries for OMCs
(BPCL, HPCL and IOC) as the government had not increased retail fuel price due to
high inflation and state elections. However, complex refineries (RIL, Essar, MRPL)
are expected to declare major surge in refining margins due to higher product price
and wide spread between sweat and sour crude.
There are multiple factors which can bring down the crude oil prices such as stepping
down of Libyan leader Muammar Qaddafi, an early ending to QE2, a strengthening
US Dollar, and profit taking in some of the commodity related funds that include
Gold, Silver, and Oil.
Sensex v/s Oil and Gas sector performance analysis
In the last one month, Sensex had given a return of 6.6% whereas Bse Oil and Gas
Index had given 6.7% return. In March'11, Essar Oil (acquired Shell refinery) had
given the highest return of 15.6% followed by Aban Offshore 12.5% (higher crude
prices improved exploration outlook), Shiv-vani oil 11.5% and Gujarat Gas 9.3%.
Ageis logistics was the only stock in the oil and gas space which had given negative
returns.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
OIL & GAS INDUSTRY OVERVIEW
Key observations
Uncertainty and fear driving the oil price higher.
Brent crude oil price surged to USD$120/bbls (05th April'11), the key factors
supporting the oil prices are the prolonged disruption in Libya, Bahrain,
Yemen, Syria, concern of unrest spreading to other oil rich countries such as
Saudi Arabia (second largest crude producer today, after Russia) and dollar
depreciation.
We believe the two major events influencing the oil price in the short term
are disruption in Libya (supply side) and devastating tsunami in Japan
(demand side). We expect the implication will be two-tiered. First, the
disaster will cause a temporary reduction in Japanese oil demand, partly
offsetting the Libyan supply shortfall, Second, in the longer term it is
expected that the Japanese disaster will cause oil demand to rebound when
they get underway reconstruction efforts to partly cover the losses from
nuclear power generation.
In Mar'11, OPEC total crude oil supply decreased by 143k bopd (YoY) to 29.02 Mn
bopd with Libya's crude supply falling by 1.135 Mn bopd (YoY) to 390k bopd,
Angola's supply falls by 185k bopd (YoY) to 1.75 Mn bopd.
On the other hand, due to the loss of refining capacity in Japan (two refineries with
capacity of ~4.5 Mn bopd are shut) the price of refined products has increased as a
result world over refiners is seeing their gross refining margins improving. In
March'11, the Singapore refining margin has improved by 16.5% (MoM) to
USD$7.2/bbls, similarly, Gas oil price has increased by 11.6% (MoM) to USD$133.4/
bbls, followed by Naphtha price increased by 9.9% (MoM) to USD$107.4/bbls.
We believe rising crude oil price will lead to higher under-recoveries for OMCs
(BPCL, HPCL and IOC) as the government had not increased retail fuel price due to
high inflation and state elections. However, complex refineries (RIL, Essar, MRPL)
are expected to declare major surge in refining margins due to higher product price
and wide spread between sweat and sour crude.
There are multiple factors which can bring down the crude oil prices such as stepping
down of Libyan leader Muammar Qaddafi, an early ending to QE2, a strengthening
US Dollar, and profit taking in some of the commodity related funds that include
Gold, Silver, and Oil.
Sensex v/s Oil and Gas sector performance analysis
In the last one month, Sensex had given a return of 6.6% whereas Bse Oil and Gas
Index had given 6.7% return. In March'11, Essar Oil (acquired Shell refinery) had
given the highest return of 15.6% followed by Aban Offshore 12.5% (higher crude
prices improved exploration outlook), Shiv-vani oil 11.5% and Gujarat Gas 9.3%.
Ageis logistics was the only stock in the oil and gas space which had given negative
returns.
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