Oil and gas counters gain as investors buy on weakness

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KUALA LUMPUR (Dec 28): Oil and gas stocks gained today after investors accumulated shares in the sector on price weakness.

SapuraKencana Petroleum Bhd rose 22 sen or 12.15% to a high of RM2.03 in morning trade, but pared down the gains to trade at RM2.02 apiece as at 12.23am. The actively traded counter also saw about 17.6 million shares done.

UMW Oil and Gas Bhd gained as much as 4 sen or 3.6% to RM1.15, with some 1.7 million shares changed hands as at 12.22am.

Meanwhile, downstream oil and gas counter Petronas Dagangan Bhd climbed 60 sen or 2.5% to RM24.60 at 11.26am, with a thin volume of 49,100 units traded. The top gainer on Bursa Malaysia had hiked to a high of RM25.20 apiece earlier this morning.

Petron Malaysia Refining & Marketing Bhd jumped 26 sen or 6% to a high of RM4.59, with 848,900 shares done at 12.28am. Petron is the seventh top gainer in the local bourse today.

The share price hike of oil and gas counters today is on the back of the slightly recovered Brent Crude oil price from a seven-year low of US$36.11 per barrel to US$37.89 per barrel on Dec 24. However, it has shed 8 US cents to US$37.81 per barrel at 12.05pm today.

Kenanga Research analyst Sean Lim said that investors were accumulating oil and gas stocks on share price weakness. Citing the example of SapuraKencana, he said the previous closing price of RM1.81 was quite cheap, hence investors see the opportunity to gather the stocks.

However, he believed the share price would be stagnant after it moved to above the RM2 level unless oil prices recover.

On the overall oil and gas sector, Lim believed there is a lack of catalyst that could boost the share price of these counters.

However, he said the World Oil Outlook report issued by Organizations of the Petroleum Exporting Countries (OPEC) on Dec 23 stressed that there could be a gradual improvement in market condition. Also, OPEC said that oil price could rebound to US$70 by 2020.

He said the report by OPEC gave a "less bleak" outlook on the world oil market, which could prompt investors to interpret that oil price would have bottomed and hence an opportunity to accumulate.

Lim also did not discount the possibility of year-end window dressing activities that pushed up the share price of the sector.

(Note: The Edge Research's fundamental score reflects a company's profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)