the oil and gas sector will be "marginally negative in the short term but will benefit in the medium term". Fall in crude oil prices may lead to inventory losses and impact gross refining margins and profitability of OMCs in the short term.
The death toll from coronavirus has risen by 116 in China’s Hubei province. While India Ratings and Research (Ind-Ra) in a statement said the coronavirus outbreak is unlikely to affect Indian corporates’ supply chains in the near term, provided it remains contained in the Hubei province. This global epidemic has impacted supply chains across the world. China is a major trading partner of India and the manufactured goods have the highest share in India’s exports to China, followed by petroleum and crude products.
According to Geojit Financial Services, the oil and gas sector will be “marginally negative in the short term but will benefit in the medium term”. The top picks from this sector include RIL, BPCL, IOCL, HPCL, GAIL and Petronet. In the afternoon session, RIL shares were trading 1.50 per cent higher at Rs 1,496, BPCL was up 2.39 per cent at Rs 480.30, shares of Indian Oil Corporation were ruling at Rs 115, up 0.22 per cent and HPCL was trading higher at Rs 237.55, up 1.09 per cent. While GAIL shares were ruling 4.37 per cent lower at Ts 124.60 and Petronet LNG was down 0.98 per cent to Rs 262.50 apiece on BSE.
China is the second-largest consumer of oil and the third largest consumer of gas in the world. Amid the coronavirus outbreak, “there is a fear that Chinese demand would be severely impacted, as a result, crude oil and gas prices have dipped almost 15% over the last one month,” the brokerage company said in a research note. “Fall in crude oil prices may lead to inventory losses and impact gross refining margins and profitability of OMCs in the short term. However, lower crude prices in the long term will enable OMCs and refineries to recover profitability by the reduction in under-recoveries of public sector oil marketing companies (PSU OMCs) on the domestic sale of LPG and kerosene at controlled prices. Cheaper crude will help in containing current account deficit, rupee and inflation,” Geojit Financial Services said.
Meanwhile, the S&P BSE Oil and Gas index was trading lower at 14,147 weighed down by GAIl, ONGC, IGL, Petronet and GSPL. On the other hand, BPCL Castor India, RIL were among the top index gainers.