Oil & Gas Weekly Review: 5th – 11th January 2009
• Clearly not out of the woods
The release of job data that showed an increase in unemployment rates in the US demolished any gains seen in oil prices over the week. Before that, reports on high stock levels also put a stop in rising prices. To note, prices were rising from the previous week on speculation that geopolitical
risks in Israel and in-between Russia will disrupt supply, and hit a one month high of US50.47 on Tuesday.
• Unfavourable news for Fabricators.
Energy Current reported that the demand for deepwater-capable floating drilling rigs remains at a very high level, thriving on oil and gas companies’ continued interest in deepwater exploration around the world. However, it seems as though fewer long-term contracts are being signed between rig owners and oil companies. Also, not as many new build orders are being made, in addition to current orders being canceled or options not being exercised and this was seen in Singapore at Jurong Shipyard & Keppel Corp as well as shipyards in Korea. While this might indicate a cap in foreign contracts for our local fabricators, we believe that their numbers will still be stable from contracts dished out by Petronas.
• News & Views.
The US Government is taking advantage of low crude oil prices to boost its emergency stock piles and reports that it will seek contracts and make arrangements for the delivery of nearly 20m barrels of oil to add to the reserves of 702m barrels. In Saudi Arabia, Aramco is looking to raise its light sweet crude prices for sales to Asia and US as they has expected crude prices to increase upon supply cuts but it wasn’t quite the case. On the local news front, corporates were generally quite during the week with no major contracts announced.
• Maintain NEUTRAL on the Sector.
While most companies have their 2009 orderbooks locked in there continues to be much concern on orderbook replenishment amongst companies to sustain 2010/11 earnings, most of which are unwilling to commit to 2010 forecasts at this point given the uncertainties in the market. We believe that it will be some months before the industry sees the light of day hence we remain Neutral on the sector.
Share prices gained during the week despite the decline in oil prices with a wave of positive sentiments at the start of the year. We expect more volatility ahead and see that there might be profit taking activities next week.
Entry filed under: Business, Finance, Stock Market. Tags: 2009, Aramco, deepwater exploration, deepwater-capable floating drilling rigs, Energy Current, Fabricators, January, Jurong Shipyard & Keppel Corp, market movements, Oil & Gas, oil prices, Petronas, Saudi Arabia, weekly review.