By Ranjit Singh
THE broader FBM KLCI lost some 50 points this morning before settling at a loss of 46 points to 1,436 points at 12pm. Bursa Malaysia has come under heavy selling pressure as it was faced by the plunge in global oil prices, the worsening Covid-19 and the uncertainty in the domestic political scene.
One of the worst-hit sectors was the oil and gas (O&G) sector which saw many stocks at their 52-week low level. The impasse in Organisation of Petroleum Exporting Countries (OPEC) talks in Vienna yesterday had caused Brent crude oil prices to nosedive to around the US$30 per barrel levels from the US$50 plus per barrel levels previously.
Almost all the companies in the O&G sector fell sharply today in the aftermath of the plunge in global oil prices. Petronas Dagangan Bhd declined by 86 sen to RM21.22, Dialog Bhd lost 29 sen to RM3, Velesto Energy Bhd fell 15 sen to 15 sen while Hibiscus Bhd shed 26 sen to 45 sen at noon today.
It would be difficult to gauge the bottom for O&G stocks as the impact from the imbroglio at OPEC has not been determined. Given this scenario, there may be further downside to O&G counters.
TA Research in a note said that at the bi-annual OPEC conference held at Vienna, the oil alliance failed to reach an agreement on production cuts. According to Russian Energy Minister Alexander Novak, OPEC members may now pump according to their discretion from April onwards. Nevertheless, current production quotas remain the status quo until end-March.
However, pending OPEC’s next meeting, it is uncertain if the cuts will extend thereafter. OPEC’s unexpected deadlock has surprised the broader market. To recap, the consensus was expecting additional production cuts of 1 million to 1.5 million bpd.
TA Research opines that oil markets will reel back on the possibility of a permanent collapse to OPEC. Of particular concern is media reports that Saudi Arabia plans to boost oil output to well above 10 million bpd. According to Bloomberg, Saudi Aramco has engaged in an all-out price war. This is via slashing prices for its crude and offering unprecedented discounts to Asia, Europe and the US. – March 9, 2020
