Downtrend Persists?

Latest News – This cut in production is a first since 2008 and is sentiment positive. Brent oil has rallied by some 10.9% and now trades at the US$51.64 level. Further details will be worked out at the next Opec meet on Nov 30.

Hong Leong Investment Bank Research analyst Lim Sin Kiat believes that this development is not sufficient to improve local oil and gas (O&G) services players’ earnings, as the anticipated oil price improvement is not expected to lift oil producers’ capital expenditure (capex) significantly, at least in the medium term.

“The only company which would be directly impacted by the oil price movement in our coverage would be SapuraKencana Petroleum Bhd. According to our sensitivity analysis, an incremental US$10 per barrel improvement in Brent oil prices would bring about a 42% increase in our current earnings forecast,” he said.

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Where is SapuraKencana (SKPetro) heading?

The announcement of planned production cut by OPEC had led to positive movement in the share price of SKPetro.

Current GP SKPetro.png

Nevertheless, since 2014, SKPetro appears to be in a consistent downward channel, with certain false breaks. Its 200D-moving average appears to be forming strong resistance against any price upward movement.

5218.MY.jpeg

For SKPetro to sustain its upward trend, it has to make significant break above its 200D-moving average resistance line. Currently, it has not made significant breaks above the resistance line.

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Author: Ken Utau

Markets Observer + Food Lover

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