SINGAPORE (Jan 5): With the production cut announced by OPEC in November, RHB Research has forecast crude oil prices to average at US$60 a barrel for 2017.

At this price level, oil majors and upstream crude oil producers would be incentivised to restart their exploration and development projects, according to RHB’s Singapore research team.

That will be good for companies under RHB’s coverage, as they build vessels for exploration and development portion of the value chain.

However, the brokerage points out that there would be a delay of one to two years, before the lower crude oil prices translate into newbuild orders and better earnings for Singapore’s O&G companies.

As such, RHB maintains its “overweight” rating on the sector and recommends buying Keppel Corp, as its industrial and utilities segment would provide a recurring income and a buffer for the lower orderbook in its offshore and marine segment.

“If there is a short-term rally in crude oil prices, we expect Sembcorp Marine’s share price to follow in tandem. However, we still expect earnings for the pure O&M player to continue to be weak in the short to mid term,” concluded the brokerage.

Shares in Keppel and SembMarine were trading higher at S$5.84 and S$1.44 at mid-morning on Thursday.