Chart of the Day: Are Singapore’s oil and gas stocks reaching a capitulation point?

Brent crude fell 2% yesterday.

Analysts believe that there will be a 10-15% short-term oil price downside.

According to a report by OSK-DMG, Singapore oil and gas (O&G) stocks dropped 5-16% yesterday when Brent crude fell 2% intra-day to USD67.50/bbl.

Could this be a capitulation? OSK-DMG illustrates a worst-case scenario wherein there will be a 10-15% short-term oil price downside from here before bumping up against marginal deepwater costs, which form the oil price floor from a fundamental perspective.

OSK-DMG says that the market’s fear is palpable, creating a positive environment for mid-term returns for investors who can ride out the volatility.

Oil prices at this level will hit ultradeepwater hard, but shallow-water fields (at USD25-50/bbl) remain strongly profitable and production-related work are unlikely to be significantly affected.