Morgan Stanley Sees Surprises Boosting India's Oil Stocks

Morgan Stanley has expressed positive views on oil stocks in India, citing several surprises that could boost their performance. The brokerage noted that spikes in merchant power prices and resilience on natural gas demand despite three times higher LNG prices are unexpected positives.

According to Morgan Stanley, the current energy shock is accelerating the diffusion of coal, LNG, and renewables in power and energy markets more rapidly than expected. This trend is driven by limitations on grid capacity, rising demand for gasoline, and a shift from cooking gas to CNG. As a result, pricing power improvements are being seen across power and energy supply chains.

The brokerage highlighted three surprises: the resilience of LNG consumption despite 2.5 times higher costs compared to alternative fuels; electricity spreads for fossil-based power generation rising as renewable costs increase; and a shift in capital allocation towards expanding trading footprints, buying own tankers, and finding energy reserves.