Oil & gas stocks steal the limelight on Bursa

17 Sep 2019 / 20:57 H.

PETALING JAYA: Oil and gas (O&G) stocks on Bursa Malaysia surged today and they are expected to enjoy further price appreciation this week following the attacks on the world’s biggest processing petroleum facility in Saudi Arabia last Saturday.

Petronas Chemicals Group Bhd (PetChem), Hengyuan Refining Company Bhd, Petron Malaysia Refining & Marketing Bhd, Petronas Dagangan Bhd (PetDag) and Hibiscus Petroleum Bhd were among the top O&G gainers on the local bourse.

PetChem’s share price was up 4.86% or 36 sen to RM7.77, while Daya Materials Bhd soared 100% or half a sen to emerge as the top gainer in percentage terms.

Top active O&G stocks include Sapura Energy Bhd, Bumi Armada Bhd, Alam Maritim Resources Bhd, Velesto Energy Bhd and Dayang Enterprise Holdings Bhd.

The Energy Index jumped 2.79% or 30.47 points to 1,122.58 points, trading between a high of 1,140.67 and a low of 1,119.51 during the day.

On Monday, Brent crude oil, the international benchmark crude, ended at US$69.02 (RM288.50) a barrel, surging US$8.80, or 14.6%, its biggest one-day percentage gain since at least 1988. US West Texas Intermediate futures settled at US$62.90 (RM262.92) a barrel, soaring US$8.05, or 14.7%, the biggest one-day percentage gain since December 2008.

The attack on Saudi oil facilities has halved the kingdom’s oil output, affecting over 5% of global crude supply.

PublicInvest Research said while this incident undoubtedly will cause the biggest global supply disruption ever in history, albeit temporarily, it reckoned the price spike signals more geopolitical worries ahead. The US has insisted that Iran is to blame, which could lead to US and Saudi retaliatory strikes against Tehran – which could in turn spark open war.

“Having said that, we believe all these will keep oil prices elevated, providing near-term trading opportunities. Among the local oil and gas players, Hibiscus is the biggest beneficiary given its direct proxy to the oil prices as an oil producer in the upstream segment.”

The research house retained its “overweight” stance on the O&G sector with crude oil prices seen hovering around US$65-70 a barrel in the near term. Over the longer term, the research house thinks the oil price is fair to trade at US$60 a barrel, reflecting the real fundamentals of global demand and supply.

Factoring in supply disruption of 5.7 million barrels per day, Affin Hwang Capital said oil demand will far exceed supply, ceteris paribus, which is positive for global oil prices.

“We maintain our 2H19 Brent oil price assumption at US$65-70 a barrel, but there could be upward bias to our current assumption in the short-term depending on the timeline of production resumption.”

Affin Hwang, which maintained its neutral sector rating, said a supply disruption of this scale should result in a more bullish sentiment for Brent oil prices and sector in the near term, putting O&G stocks under the spotlight.

“Hibiscus (non-rated) is the direct proxy to benefit from an oil price recovery. In our coverage, PetChem stands to benefit from a recovery in petrochemical prices and PetDag with a possible inventory lagged gain. We have buy calls on Serba Dinamik Holdings Bhd, Bumi Armada, Velesto Energy and Kelington Group Bhd, which are all service providers, and their earnings do not directly benefit from higher oil prices. However, we believe these stocks would likely see higher interest in view of the current bullish oil price sentiment.”

Malacca Securities said while O&G stocks may see increased following due to the strengthening oil prices, conditions elsewhere may be weighed down by the higher fuel cost, particularly those that are strongly dependent on energy.

“Therefore, we see the cautious undertone continuing to sap market interest and the key index could again drift below the 1,600 points level, with the next support pegged at the 1,590 level. The resistances are at 1,610 and 1,620 respectively.”

The FBM KLCI rose 3.05 points or 0.19% higher at 1,604.30 points today.

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