KUCHING: Despite a slump in crude oil prices in October, local oil and gas (O&G) players are not expected to feel the pinch as the sector remains buoyed by new contract awards and a pick-up in exploration and production activities.
According to the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research), the WTI and Brent crude declined 5.5 per cent and 3.1 per cent respectively in October, marking the largest drop since the sharp 18 per cent decline in May this year.
“The slide was triggered by the bleak global economic outlook, exacerbated by the International Monetary Fund (IMF) and World Bank’s downgrade in their gross domestic product (GDP) forecasts,” highlighted the research firm in its monthly review on the O&G industry.
“The market therefore priced in an expected slowdown in demand for oil, especially from East Asia.” MIDF Research believed that the drop in October’s prices could have been driven by high oil inventories in the US on the back of fear of global slowdown (which will impact demand adversely), economic data suggesting slowdown in China, rise in gasoline prices due to outages from Hurricane Sandy and perceptions of plentiful oil supply.
“However, we are maintaining our positive stance on the O&G industry based on upbeat contract flows and corporate activities in the industry,” the firm outlined.
“We are also upgrading our 2013 WTI forecast from US$90 per barrel to US$96.50 per barrel, in-line with our economist’s world GDP projection of 4.1 per cent.” On a year-to-date basis, more than RM8 billion worth of contracts have been awarded to locally-listed O&G players.