This article first appeared in The Edge Financial Daily on October 2, 2018

KUALA LUMPUR: Kenanga Investment Bank Bhd (KIBB) has issued four new structured warrants covering the oil and gas (O&G) sector, just as Brent crude oil price surpassed US$80 (RM331.20) a barrel this week.

In a statement yesterday, KIBB said the warrants are European-style, non-collateralised cash-settled call warrants and are its largest issuance on O&G-related stocks to date.

The four were among 10 new warrants the group issued yesterday. The new warrants were issued over the ordinary shares in Bumi Armada Bhd, DRB-Hicom Bhd, FGV Holdings Bhd, Globetronics Technology Bhd, Hengyuan Refining Co Bhd, Inari Amertron Bhd, My EG Services Bhd, Sapura Energy Bhd, Ta Ann Holdings Bhd and Velesto Energy Bhd.

KIBB said oil bulls see a looming supply crunch driving Brent to US$100 a barrel for the first time in four years, as they cheer on the prospect of a “real recovery”. At press time, Brent crude was trading at US$83 per barrel.

“US President Donald Trump’s outspoken comments to raise global supply were ignored as Opec and its non-Opec states, including top producer Russia, gathered in Algiers on Sunday for a meeting that ended with no formal recommendation for any supply boost to counter falling supply from Iran ... Other analysts claim that the market’s fixation on lower barrel numbers on the supply side has blinded them to the results of the US-China trade war,” KIBB noted.

The volatility in the O&G sector, meanwhile, offers many opportunities to traders who choose the right warrant, said KIBB executive director and head of group equity broking business, Lee Kok Khee. “Savvy traders will notice that these new warrants provide higher tick sensitivity for intraday traders and greater effective gearing for medium term (two weeks to three months) traders.”