Oil & Gas sector - OCBC Investment 2016-08-23: Market speculation about a deal again

Oil & Gas sector - OCBC Investment 2016-08-23: Market speculation about a deal again OIL & GAS SEMBCORP INDUSTRIES LTD U96.SI

Oil & Gas sector - Market speculation about a deal again

  • OPEC members are meeting major exporting non-OPEC countries at the International Energy Forum in Algeria from 26-28 Sep to discuss the oil market situation, including any possible action that may be required to stabilize the market.
  • Statements from other countries such as Russia have added to speculation about a deal. At present, while many market watchers are expecting a low possibility of curtailed output by OPEC, we expect market speculation to continue till the end of Sep. 
  • We believe that this would deter short-selling in oil, offering some support for oil prices in the meantime around the $40+ range and alleviating downward pressure on oil and gas stocks especially after the Swiber incident, although oil remains volatile as seen from last night’s 3% drop. 
  • Still, the overall operating environment for companies in the sector remains tough. 
  • For investors with a longer term view and keen to gain exposure, our preferred pick is Sembcorp Industries [BUY, FV: S$3.07] which has a more diversified business mix, supported by a relatively stable utilities segment that has exposure to emerging market growth. 
  • Maintain NEUTRAL on the broader sector.




Low Pei Han CFA OCBC Investment | http://www.ocbcresearch.com/ 2016-08-23
OCBC Investment SGX Stock Analyst Report BUY Maintain BUY 3.070 Same 3.070


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