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The New Oil Order; Below US$80 Crude Oil
Singapore Market Commentary | 28 November 2014
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By: Peter Ng
Articles (81) Profile

Market participants were expecting that the Organisation of the Petroleum Exporting Countries (OPEC) would not scale back production to reverse a dive in oil prices. Anticipations were eventually confirmed in a meeting held by the OPEC on 27 Nov-14 as it rejected calls for a cut in oil production.

The decision sent crude oil prices as reflected in the US crude oil futures to close at US$68.55 on 27 Nov-14, a 5-year low since 2009. Despite being a double-edged sword as most member countries of the OPEC require oil prices to stay above US$80 in order to balance their national budgets, analysts attributed the move to a collective wager by the OPEC to drive out some of the higher-cost US shale oil producers.

Meanwhile on the local soil, the shockwaves from the plunging oil prices sent share prices of blue chip oil and gas players, Sembcorp Marine and Keppel Corporation to sink to their two-year lows on the back of lower earnings forecasts.

However, a silver lining is formed for companies who used oil as a factor of production for goods and services. Notably, national carrier, Singapore Airlines made ways to reverse a 3-month downtrend from a closing low of $9.61 to $10.51 on 27 Nov-14. The positive echoes also resonated to transport operators such as ComfortDelGro Corporation and SMRT Corporation.

On a broader scale, the Straits Times Index continued its advance as the index soared and broke past the resistance of the 3,300 territory. While analysts from Goldman Sachs used the term, “New Oil Order”, deeming the oil price decline as permanent, the transition on the other hand, has created value plays for investors.

Backed by a strong interest in investments, Peter's research spans across a range of industries, with his focus placed on companies listed on the SGX.

Please click here for more information about this author.

ComfortDelGro Corp  2.440 +0.03 +1.24%   
Business: [FY18 Turnover] Public transport services (71.2%), taxi (19.1%), others (9.7%).

Insight: May-19, 1Q19 revenue rose 7.8% to $947.3m, underpi... Read More
Keppel Corp  5.980 +0.04 +0.67%   
Business: [FY18 Turnover] Infrastructure (44.1%), offshore & marine (O&M) (31.4%), property (22.5%), investments (2%).

Insight: Apr-19, 1Q19 revenue rose 4.1% underpinned by high... Read More
Sembcorp Marine  1.220 +0.030 +2.52%   
Business: Co is a leading global marine & offshore engineering group. [FY18 Turnover] rigs & floaters, repairs & upgrades, offshore platforms (98.8%), ship chartering (1%), others activities (0.2%).

Insight: May-19, 1Q19 revenue fell 31.3% to $810.6m due to ... Read More
ComfortDelGro Corp  2.440 +0.03 +1.24%   
Business: [FY18 Turnover] Public transport services (71.2%), taxi (19.1%), others (9.7%).

Insight: May-19, 1Q19 revenue rose 7.8% to $947.3m, underpi... Read More


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