No respite for shipping, oil and gas stocks as oil price bloodbath continues

Almost 20% of their market cap has been wiped out.

The past quarter has been particularly cruel to shipping and oil and gas stocks. According to DBS, around 20% of these firms’ market capitalization has been wiped out in the wake of the Brent crude’s price crash.

The Brent crude has been hovering at <US$80 per barrel, way below DBS’ base case assumption of US$95 per barrel and uncomfortably close to its bear-case scenario of US$75 per barrel.

DBS also noted that the OPEC is still unlikely to cut its output at this point, and continuing sanctions against Iran could further add to the supply problem.

“Sentiment will remain fragile till we see stability in oil prices. Hopes are for oil prices to rebound post-OPEC meeting on 27Nov, which could lead to a rebound in oil & gas stocks,” stated DBS.

Here’s more from DBS:

Should oil price stay at its current low levels for a sustained period, this will lead to more E&P projects being deferred.

Petrobras added fuel to the fire when investigations broke out last week, implicating heavy construction companies –OAS, Odebrecht and Queiroz Galvao, which have contracts to build and supply the US$18.5bn Abreu and Lima refinery, in the alleged laundering and corruption case dubbed operation ‘car wash’.