PETALING JAYA: The local bourse staged a rebound driven by higher global crude oil price and as well as a cut in key interest rate by the central bank in a bid to encourage borrowing, investment and consumption among businesses and consumers.
This is despite analysts expecting oil price recovery to take years due to high inventory.
The 30-stock benchmark index FBM KLCI rose 12.96 points or 0.94% to close at 1,389.55 points yesterday led by banking stocks, Petronas-linked stocks and Tenaga Nasional Bhd. The index was down more than 31 points to 1376.59 on Monday as investors were spooked by the prospects of renewed US-China trade tension.
Global crude oil price has been on the rise over the last five days from its 22-year low as more countries started to ease coronavirus (Covid-19) lockdowns and supply cuts by oil producers Opec+ members.
Earlier, the Organisation of Petroleum Exporting Countries (Opec), Russia and other producers, a group known as Opec+, have set to cut supply by 9.7 million barrels per day starting May 1.
The international benchmark Brent crude oil surged more than 45% in five days from below US$20 per barrel to US$29.19 yesterday. Despite the surge, over the last four-month, Brent crude oil has declined more than 55% from US$66 per barrel.
Maybank IB Research expected that it would take about 24 months before oil demand normalises.
“We are already seeing early signs that indicate that demand for petroleum products is beginning to rise globally, particularly China and the United States, especially in the road transportation segment, but not the aviation sector.
“We expect Brent oil price to average below US$40 per barrel in 2020 as inventories remain high and above US$40 in 2021 as inventories taper, ” it said in a report.
Global oil consumption could be the worst in the second quarter of this year and the turning point will start from September.
The US crude oil prices saw an unprecedented slump from a peak of US$66 per barrel early in January to negative US$37 per barrel on April 20 due to falling demand.
To allay such a scenario from repeating in May, several US oil companies have agreed to rent space to store 23 million barrels of oil in the Strategic Petroleum Reserves facility until Mar 2021, ” Maybank said.
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