SEMBCORP INDUSTRIES LTD
U96.SI
Oil & Gas sector - OPEC deal – waiting for the details
- In our 23 Aug 2016 sector note, we mentioned that market speculation of a potential OPEC deal would deter short-selling in oil, “offering some support for oil prices” and “alleviating downward pressure on oil and gas stocks”.
- With the news that OPEC had agreed on a rough outline of a deal in Algiers, oil prices have rallied to the $50 level, boosting oil and gas names such as Ezion Holdings (+ 20%), Triyards Holdings (+15%), Keppel Corp (+5%), and Sembcorp Marine (+6%).
- While we are encouraged by this, we note that the devil is in the details as it is unclear how the agreement will be implemented in practice, including country-level production quotas.
- The details are unlikely to be hashed out till OPEC meets again on 30 Nov, before which there could be some oil price volatility should there be signs that certain members start to get cold feet.
- Maintain NEUTRAL on the broader sector.
Low Pei Han CFA
OCBC Investment
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http://www.ocbcresearch.com/
2016-10-07
OCBC Investment
SGX Stock
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