Rising crude oil prices a boon for O&G stocks

 

The strength of oil prices and expectations of increased capital expenditure by Petroliam Nasional Bhd has given the shares of oil and gas services providers a huge boost. (AFP pic)

PETALING JAYA: Oil and gas (O&G) counters took centre stage today on Bursa Malaysia, driven by rising crude prices, decreasing inventories and production cuts with Brent crude trading near US$89 per barrel, hovering at the highest levels since January.

During the midday trading session, the energy index, which monitors the performance of oil and gas-related firms, saw a gain of 14.05 points or 1.64%, reaching 870.19 points. By the close, it had retreated to 861.03 points, up 4.9 points.

Velesto Energy Bhd was the second most active stock traded on the bourse today with 85.75 million shares changing hands. At midday it was up 8.51% or 2 sen to 25.5 sen before closing at 25 sen, an increase of 6.38% or 1.5 sen with a market capitalisation of RM2.05 billion.

The stock has registered an impressive 70% year-to-date increase.

Bumi Armada Bhd was the fourth most actively traded counter today with 78.98 million shares traded, ending up 1 sen or 1.89% to 54 sen, valuing the group at RM3.2 billion.

Hibiscus Petroleum Bhd saw 38.27 million shares traded today, recording a marginal 0.98% or 1 sen rise to RM1.03, giving it a market capitalisation of RM2.07 billion.

KNM Group Bhd was the sixth most active stock with 70 million shares traded, about three times its 200-day average of 22.95 million. It hit a high of 11 sen or a 15.78% rise at midday before ending the day up 5.26% or half-a-sen at 10 sen, valuing the group at RM384.36 million.

However, a few of the O&G stocks went in the opposite direction. Dayang Enterprise Holdings Bhd’s shares were down 7 sen or 3.78% to RM1.78, giving the group a market capitalisation of RM2.06 billion.

Perdana Petroleum Bhd, which posted an impressive year-to-date gain of more than 100%, fell 5.66% or 1.5 sen to 25 sen, maintaining a market capitalisation of RM544.43 million.

Rakuten Trade Sdn Bhd had anticipated O&G stocks would see active trading today as crude oil prices are trending higher in view of the decline in inventory and production cuts.

Kenanga Research, while keeping its “neutral” position on the O&G industry, expressed ongoing optimism for the sector.

It said the optimism was driven by the consistent growth in O&G capital expenditure (capex), resulting in robust daily charter rates (DCRs), increased fleet utilisation, and continuous awarding of new contracts to upstream service providers.

In a note today, the research house anticipated a continued increase in O&G contract activities, thanks to the strength of oil prices and expectation of increased capex by state oil corporation Petroliam Nasional Bhd (Petronas).

Petronas recorded a 13% year-to-date growth in capex for the first half ended June 30, 2023 (H1 FY2023), reaching RM21.4 billion. This marked the highest level of capex for the group since the first half of 2016.

Petronas has set its sights on achieving RM300 billion in capex for the period spanning from 2023 to 2027.

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Kenanga also cited the significant expected growth in the global floating production storage and offloading (FPSO) market in the near future, alongside robust regional tank terminal storage rates surpassing S$6 per m3.

“On the other hand, we believe that demand will remain tepid in the near-term for petrochemicals and crude tankers,” it said. - FMT