Our preferred oil sector exposures
About the author:
- Author name:
- By Adrian Prendergast
- Job title:
- Senior Analyst
- Date posted:
- 16 September 2019, 3:00 PM
- Sectors Covered:
- Mining, Energy
An explosive drone strike on a Saudi Arabian oil facility over the weekend has removed 5.7 million barrels per day of oil production (equivalent to 5% of global supply).
To say the least, this is material to supply-demand fundamentals. We had estimated a 1.7 million barrel per day surplus prior to the drone attack. This leaves an immediate and c4.0 mmbopd supply deficit.
There are some reports that Saudi Arabia can offset half of the lost production immediately, leaving a still sizeable c2.0 mmbopd deficit in the consumption-production balance.
Understandably, global oil prices surged on the news by +19%.
Investor sentiment, prior to the attack, had reached a drastic low.
On the resulting share price weakness this was creating, we had been gradually upgrading an increasing number of oil & gas stocks we cover to Add ratings. As a result we have a lot to choose from.
Our preferred sector exposure
Stocks we cover in order of oil price leverage:
- Sundance Energy (SEA)
- Otto Energy (OEL)
- Oil Search (OSH)
- Santos (STO)
- Senex Energy (SXY)
- Woodside Petroleum (WPL)
- Cooper Energy (COE)
- Central Petroleum (CTP)
Our overall sector preference order in a forced ranking:
- Woodside Petroleum (WPL)
- Oil Search (OSH)
- Santos (STO)
- Cooper Energy (COE)
- Oil Search (OEL)
- Sundance Energy (SEA)
- Senex (SXY)
- Central Petroleum (CTP)
More information
We are happy to keep buying our list of preferred sector exposures. None appear expensive, having only just started to move over the last few weeks.
Not many details are yet known, but repairs to the outage in Saudi Arabia supply could extend several months.
If you would like more information, please speak with your Morgans adviser or contact your nearest Morgans office.
Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.
-
Print this page
-
Copy Link