06 September 2012

Oil and Gas - Tight supply fuels GRM surge; sector update ::Edelweiss, PDF link

Brent jumped 10% in August, averaging USD114/bbl, on EU optimism and lower Iranian supplies. INR was flat against USD at 55.6. Indian Complex GRMs and Singapore GRMs improved USD3.9/bbl and USD1.8/bbl, respectively, due to supply tightening, especially in North America. On the marketing front, under-recoveries surged MoM due to higher crude prices and higher margins. Petrol, diesel, LPG, and kerosene under-recoveries averaged INR4.3/ltr, INR12.7/ltr, INR 275/cyl, and INR28.8/ltr, respectively (up 7-42% MoM).  Top Picks: Large Cap—RIL and BPCL; Mid Cap—IGL and PLNG.
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Some major company events during the month
ü  OVL has zeroed in on two shale gas assets in US and Canada, but has been unable to close the deals due to its investment in Iran and Sudan.
ü  Major fire in a Venezuelan refinery, second largest single location refinery in the world (cap of 0.645 mbpd), resulted in temporary boost in GRMs.
ü  RIL-BP received MC approval for FY11/FY12 budget, FY13 capex of USD1.06bn, and development of three unapproved discoveries with conditions.
ü  GAIL inked LNG agreements with GDF Suez of France (0.8 mt) and Gas Natural Fenosa of Spain (3 bcm).



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