Quote on Crude Oil by Swarnendu Bhushan - Co - Head of Research, PL Capital
Below the Quote on Crude Oil by Swarnendu Bhushan - Co - Head of Research - PL Capital
Middle East crisis doesn’t appear to go away with US hitting Iran and Iran retaliating and extending the same to more and more neighbouring countries. The region is home to ~30% of global oil production while Strait of Hormuz accounts for 14-15mnbopd of global oil demand and 5-6mnbopd of refined products. The region is also home to large storage terminals, gas producing/exporting sites as well as oil refineries. Although it is difficult to comment on how long and how worse the war situation may be, as long as crude oil supply is impacted, oil prices are expected to remain high. It has already jumped from USD70/bbl in past few days to USD100/bbl. Rising oil prices would worsen the already loss making Oil Marketing Companies and they are expected to remain under pressure if oil prices remain strong. On the other hand, although financials of upstream companies are likely to be better, in absence of any structural volume growth story, these are unlikely to give a significant outperformance. Damage to refineries is likely to keep product cracks higher for longer, thereby benefiting the Indian refiners. Independent refiners like MRPL and Chennai Petroleum are likely to continue posting good numbers and refining segment of OMCs are also expected to benefit.
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