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Hot Sector – Trading the excellent volatility in Oil and Gas stocks

Trading room – Fri 14 Dec 2018

Have oil prices hit a bottom or will there be further downside? Brent crude price was trading as high as USD86.29 per barrel in early October but has slumped very quickly to as low as close to USD60.00 per barrel recently.  The reversal shocked many analysts who were predicting then that oil price could be on the cusp ofrecovery.

Some even predicted that it could breach US$100 per barrel as early as next year at that time. However, the price slumped over 32% in a shortspan of two months.

Those who have been following the mPower Algorithm reports know that the critical level for the oil prices were broken then at the two stated levels mentioned and we exited the sector immediately two months back.

But with the slump, are there opportunities now to trade back sold-down oil and gas stocks and buy-in from a near “bottom”? What is the current outlook for oil price and which oil and gas stock would be the best candidate to trade?

Currently, the benchmark Brent crude oil was up around 2percent to USD61.34 per barrel while US West Texas Intermediate light crude ended Thursday’s session up 2.8 percent to USD52.58.

Global oil supply has outstripped demand over the last six months, inflating inventories and pushing crude oil to its lowest in more than a year at the end of November according to analysts and media reports.

Note: Certain info presented in the tables above has been redacted to comply with the agreement with elite members of the mPower Algorithm program and mPower Trading program and certain institutional clients. The above analysis reflects our personal view only and is subject to terms of use. Please refer to the full report inside for the complete info.

OPEC (Organisation for Economic Co-operation andDevelopment) and other big producers, including Russia, said last week they would try to trim surplus supply, agreeing to cut production by a total of 1.2million barrels per day.

Demand for oil demand is slowing, with OPEC saying that demand for its crude in 2019 would fall to 31.44 million bpd, 100,000 bpd less than predicted last month and 1.53 million bpd less than it currently produces.

The United States, where weekly crude production has hit are cord, is set to end 2018 as the world’s top oil producer, ahead of Russia and Saudi Arabia.

However, crude oil being a commodity has also been affected by worries of a slowing world economic growth from the US-China trade tension and any recovery in relations between the two top economies here could see oil price reverse its downtrend fast.

Meanwhile, the IEA (International Energy Agency, has forecast global oil demand growth remaining steady, with an increase of 1.3million barrels per day this year — and rising to 1.4 million barrels per day next year — despite the uncertain macroeconomic outlook.

It was reported that a survey done by S&P Global Platts, which was released on Nov 22, reveals that most top banks and oil brokers believe Brent crude will average above US$75 per barrel next year.

Volatility is likely to be boon as oil price try to search for a bottom and local oil and gas stocks could also see opportunities for trading as they are very oversold.

When is the right time and price level to trade these down-beaten oil and gas stocks?

Some oil and gas stocks like Sapura Energy are already finding a lifeline to tide over the bad times while awaiting clearer skies.

Its shareholders gave the green light recently to its proposed rights issue of shares and Islamic redeemable convertible preference shares(RCPS-i) to raise RM4 billion — a sum that is larger than Sapura Energy’smarket capitalisation of RM2 billion.

Note: Certain info presented in the tables above has been redacted to comply with the agreement with elite members of the mPowe Algorithm program and mPower Trading program and certain institutional clients. The above analysis reflects our personal view only and is subject to terms of use. Please refer to the full report inside for the complete info.

The sector is likely to present opportunities for both intra-day and short-term trades as volatility increases from its current sold-down levels.

Watch as the key levels and cycles calculated and determined in advance present excellent trading opportunities and tracked by us under the mPower Algorithm and mPower Trading programs.