World · India Bureau
Nomura bullish on Indian oil majors despite crude headwinds
Despite maintaining a bearish long-term outlook on crude oil prices, Nomura has backed Indian Oil Corporation and BPCL as preferred plays in the oil marketing space. The brokerage expects a significant global oil surplus by 2027, which could pressure crude valuations.
LSN India ·
Nomura has retained a positive stance on India's oil marketing companies (OMCs) even as it forecasts headwinds in the international crude oil market over the medium to long term. The investment bank has flagged the potential for the largest global oil surplus on record by 2027, based on projections from the International Energy Agency, a development that could suppress crude prices in the coming years.
Among the listed OMCs, Nomura has identified Indian Oil Corporation (IOC) and BPCL as its preferred choices for investors. The brokerage's selective bullishness reflects confidence in the operational performance and market positioning of these two majors, even as crude oil headwinds loom on the horizon.
The divergence between Nomura's bearish crude oil outlook and its positive stance on OMCs suggests the analyst believes domestic refining and marketing fundamentals may remain resilient. Indian oil companies have diversified revenue streams and operational efficiencies that could help them navigate a period of lower crude prices, the implicit rationale suggests.
The forecast of a massive global oil surplus comes amid expectations of increased production capacity coming online globally, coupled with moderating demand growth in key markets. For Indian OMCs, which import significant quantities of crude, lower international prices could provide tailwinds for their downstream operations and profitability.