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