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MOSL: GASOLINE - The oil & gas monthly February 2014




Motilal Oswal Securities Ltd.


18 Feb 2014





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GASOLINE: The oil & gas monthly February 2014 SUMMARY - January 2014 Special Reports: (a) CNG/PNG to get 100% domestic gas, (b) Diesel loss at 6M low, (c) Kelkar Committee report on Indian E&P and (d) Results Preview RIL, CAIRN, GAIL and PLNG. Monthly Highlights Oil price steady, US Gas price explodes While Brent was stead MoM to averaged USD109/bbl (-1% MoM), US Henry Hub gas price exploded towards end-January and has reached USD8/mmbtu in February led by severe winter. 13th diesel price hike taken, Diesel loss at 5 month low of INR7.4/ltr Continued diesel reforms showing benefits despite sustained oil price and INR depreciation with diesel losses falling to INR7.5/ltr a five month low. Reuters Singapore GRM up 19% MoM to USD6.4/bbl GRM at USD6.4/bbl in Jan-13, was up 19% MoM led by stron recovery in Gasoline, Naphtha nd FO cracks. 9MFY14 GRM was USD5.4/bbl and FY13 was at USD7.7/bbl. Polymer margins flat while Polyester margins declined on MoM basis Domestic polymer spreads over Naphtha improved meaningfully with PVF topping increase at ~15%. demand. Polyester spreads were almost flat on MoM basis. Valuation and view We prefer ONGC/OINL in upstream (significant earnings growth opportunity) and BPCL in OMCs (strong balance sheet and E&P potential). In view of (a) ew gas price regime from April 1, 2014 and (b) likely diesel deregulation in 12-18 months Maintain Neutral on Gail due to headwinds for gas availability. Expect any fall in spot LNG prices to benefit PLNG. Maintain Buy on Cairn India for its attractive valuation and Neutral on RIL as the next earnings growth is still some time away when its new core-business/E&P projects commission from FY16/FY17.

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