The extended production cuts by the Organization of the Petroleum Exporting Countries do not point to an immediate catalyst for oil and gas stocks on Bursa Malaysia to rally.
“As oil price stabilises at US$60-70 a barrel, we do not see any immediate catalyst to O&G stocks. Nonetheless, this could lead to continuation of Petronas’ spending plan which is important for the O&G’s sector recovery over the long run,” he toldOn Friday, Bursa Malaysia’s Energy Index lost 0.45% or 4.85 points to close at 1,068.02 points.
Azim said a key concern is that most O&G companies, particularly offshore support vessel players such as Dayang Enterprise Holdings Bhd, Perdana Petroleum Bhd and Barakah Offshore Petroleum Bhd, would still need to resolve debt legacy issues, and this would distract them from pursuing further growth.
Meanwhile, HLIB Research analyst Sean Lim believes oil prices may strengthen slightly in the second half of 2019 on Opec’s production cut agreement, but noted that upside is still capped by resilient US production growth and lingering uncertainty arising from the US-China trade war putting pressure to the overall demand growth.