Rebound in Global Oil Prices shoots up Investor Interest in Oil Companies

The rebound in global crude oil prices has perked up the investor interest in the companies involved in the oil industry — either producing or providing support services — which posted 0.5% to 18% gains in this period. The same set of companies had lost between 9% and 57% of market value in the preceding seven months, when the oil prices fell 56%, but the Nifty gained 18.2%.

The global crude oil prices bounced back sharply to gain over 20% since the last weekend. After finding a bottom at near $49 per barrel, the most widely tracked benchmark Brent crude oil price jumped to $58 before taking a breather.

The medium-term outlook for oil prices remains positive, which augurs well for these companies, say experts. However, most of them would face profit pressure. “The crude oil prices have bounced back from the bottom, but it’s not likely to stay at $50 levels for long. Gradually, they will settle in $60-70 range. So, the valuations of companies in this industry, too, will improve accordingly,” said Kunj Bansal, CIO & ED with Centrum Broking. “However, the industry will have to brace for a slower growth and possibly lower profitability than previously envisaged.”

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Source:Economictimes