S’pore oil and gas plays soar on supply fears
Shares of oil exploration firms Rex International and GSS Energy jump more than 7%; rigbuilders may also get uplift
With US-China trade tensions receding, investors had been gearing up for the slew of central bank meetings led by the US Federal Reserve's likely rate cut decision.
But they were thrown a curveball yesterday following drone attacks on two Saudi Aramco facilities last Saturday, the result of which saw oil prices jump by as much as 20 per cent.
Investors and traders headed for safe havens such as gold - spot prices were above US$1,500 (S$2,063) per ounce - the Japanese yen and the greenback.
Still, oil prices dipped after US President Donald Trump authorised the release of oil from US reserves.
Sentiment in the local equities market was also affected by weak industrial and retail data from China, sending the Straits Times Index (STI) closing 7.56 points or 0.2 per cent lower at 3,203.93.
It was mixed elsewhere in the Asia-Pacific as Australia and South Korea locked in gains. But China and Hong Kong posted losses. Markets in Malaysia and Japan were closed. They resume trading today.
Last Saturday's attacks in Saudi Arabia are bound to increase geopolitical tensions in the Middle East. Yemen's Houthi group has claimed responsibility for the attacks, but US officials say Teheran was behind the attack.
Saudi Arabia contributes 10 per cent to the global oil supply, and with those two facilities accounting for half the kingdom's production, the disruption is a major supply shortage shock.
FXTM chief market strategist Hussein Sayed noted that yesterday's jump in oil prices "is the largest in almost three decades since Saddam Hussein invaded Kuwait back in the 1990s".
"Such a reaction in price suggests that we are currently facing an unprecedented threat to oil supplies that could reverberate through the global economy," he added.
DBS Group Research analysts believe that counters with exposure to the oil and gas (O&G) sector could face rebounds as a result of black gold's price surge.
Upstream firms, which predominantly conduct the exploration and production of crude oil and natural gas serve as proxies to trade on the oil price rebound, DBS analysts added.
In Singapore, such firms saw heavy trading. Rex International, which conducts oil exploration in markets such as Oman and the United Arab Emirates among others, jumped 0.6 cent or 7.4 per cent to 8.7 cents with 114.8 million shares traded, the most in the Singapore market.
GSS Energy, which has oil exploration operations in Indonesia, advanced 0.5 cent or 7.5 per cent to close at 7.2 cents.
Singapore yards could also get an uplift, DBS analysts noted.
Rigbuilder Sembcorp Marine added three cents or 2.4 per cent to $1.30. Meanwhile, its parent, Sembcorp Industries, dropped two cents or 0.9 per cent to $2.21, while Keppel Corp rose three cents or 0.5 per cent to $6.25.
Yesterday, trading volume in Singapore clocked in at 989.26 million securities, 83 per cent of the daily average in the first eight months of this year. Total turnover came to $752.49 million, 70 per cent of the January-to-August daily average.
Across the market, decliners beat advancers 227 to 169. The blue-chip index had 13 of its 30 counters in the red.
With 42.2 million shares changing hands, Yangzijiang Shipbuilding maintained its place as the STI's most active counter, but yesterday, the counter was in the red, falling four cents or 3.6 per cent to $1.08.
The local banks were lower. DBS Group Holdings eased nine cents or 0.3 per cent to $25.47, OCBC Bank dipped two cents or 0.2 per cent to $11.08, while United Overseas Bank finished at $26.34, down seven cents or 0.2 per cent.
For full listings of SGX prices, go to https://www2.sgx.com