Moody's cautioned the reintroduction of fuel subsidies would also distort market-determined price mechanisms.
KUALA LUMPUR: CIMB Equities Research believes that a rising oil price trend will be positive for all oil and gas stocks, either directly via exposure to higher selling prices of crude oil and oil products.
In its strategy report issued on Thursday it said indirectly oil and gas majors become more confident in capex spending, which will eventually feed into demand for services.
Key winners in the short term from higher oil price are Sapura Energy
and Petronas Dagangan. A higher crude oil price will also be supportive of crude palm oil (CPO) prices and positive for Petronas Chemicals.
Airlines are the biggest losers from higher oil prices.
“We have factored in a jet fuel price of US$75 a barrel for CY18F, against the year-to-date (YTD) average of US$78 and spot price of US$83.
“If jet fuel prices average US$83 for CY18F, we estimate that AirAsia Group's core net profits may be negatively impacted by approximately 30%, while AirAsia X's (AAX) group core net profits may be impacted by as much as 60%, even after factoring in the stronger ringgit,” it said.
CIMB Research said its valuations of oil and gas companies are based on Brent crude oil prices averaging US$66 in CY18F (against the YTD average of US$68 and spot price of US$74), rising to US$71 in CY19F and US$77 in CY20F.
“Most of the companies we cover are service providers and hence, do not have a direct exposure to oil prices.
“The company with the greatest direct exposure in our universe is Sapura Energy, which is expected to produce 5.2m barrels of oil equivalent (boe) in 2018F. Hence, a US$1 a barrel increase in oil price will allow Sapura Energy to book in an additional RM21m in earnings, which is about 14% of our core net loss forecast of RM152m for FY1/19F,” it said.
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