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UBS Investment Research
Asia Oil Explorer
W TI crude at six-week high
US crude stocks continue to fall
The WTI crude oil price rose 2.5%, ending last week at US$99.6/bbl, while Brent
rose 0.5% to US$118.3/bbl. US product prices, including gasoline and heating oil,
rose along with the slight jump in Brent, which helped push US crude to a sixweek
high. According to the US Department of Energy (DOE), for the week ended
15 July, crude inventories fell 3.7mbbls as refinery utilisation rose. Reuters’
consensus had expected a 1.7mbbls draw. Gasoline and distillate stocks rose
0.8mbbls and 3.4mbbls, respectively.
Refining margins decline WoW; petchem spreads fall
The Reuters Singapore complex refining margin index averaged US$7.0/bbl last
week, down from an average US$7.4/bbl the previous week. Gasoline spread (to
Dubai crude) declined US$2.0/bbl, while fuel oil spread rose US$1.1/bbl. The
ethylene-naphtha spread fell 16% WoW to US$162/t, close to its lowest level since
October 2009. PX-naphtha spread rose 2.2% WoW to close at US$544/t, while the
HDPE-naphtha spread fell 8.6%.
Refining stocks have outperformed in the past month
For the month ended 22 July and based on simple average performance, refining
and marketing stocks in Asia under UBS coverage rose 6.3%, while, on an
average, integrated and E&P stocks rose 4.6% and 3.4%, respectively.
Top picks
Our most preferred stocks in Asia are Sinopec, SinoTech, PTT Chemical, Reliance
Industries and SK Innovation.
Statement of Risk
We believe oil prices are the top risk in the sector. Our valuation of oil
companies is based on UBS’s global crude oil price forecasts. UBS forecasts
Brent crude oil prices of US$103.8/bbl in 2011 and US$95/bbl in 2012. We
have a normalised long-term Brent oil price assumption of US$95/bbl. Any
deviation from the above forecasts could change our investment conclusions.
Petrochemical plants are generally high-risk operations (particularly during new
plant start-ups), and accidents could significantly reduce plant operating rates,
leading to lower-than-expected earnings. Exploration and production activities
face risks such as volatility in oil and natural gas prices, and operational,
financial, geological and meteorological issues.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Asia Oil Explorer
W TI crude at six-week high
US crude stocks continue to fall
The WTI crude oil price rose 2.5%, ending last week at US$99.6/bbl, while Brent
rose 0.5% to US$118.3/bbl. US product prices, including gasoline and heating oil,
rose along with the slight jump in Brent, which helped push US crude to a sixweek
high. According to the US Department of Energy (DOE), for the week ended
15 July, crude inventories fell 3.7mbbls as refinery utilisation rose. Reuters’
consensus had expected a 1.7mbbls draw. Gasoline and distillate stocks rose
0.8mbbls and 3.4mbbls, respectively.
Refining margins decline WoW; petchem spreads fall
The Reuters Singapore complex refining margin index averaged US$7.0/bbl last
week, down from an average US$7.4/bbl the previous week. Gasoline spread (to
Dubai crude) declined US$2.0/bbl, while fuel oil spread rose US$1.1/bbl. The
ethylene-naphtha spread fell 16% WoW to US$162/t, close to its lowest level since
October 2009. PX-naphtha spread rose 2.2% WoW to close at US$544/t, while the
HDPE-naphtha spread fell 8.6%.
Refining stocks have outperformed in the past month
For the month ended 22 July and based on simple average performance, refining
and marketing stocks in Asia under UBS coverage rose 6.3%, while, on an
average, integrated and E&P stocks rose 4.6% and 3.4%, respectively.
Top picks
Our most preferred stocks in Asia are Sinopec, SinoTech, PTT Chemical, Reliance
Industries and SK Innovation.
Statement of Risk
We believe oil prices are the top risk in the sector. Our valuation of oil
companies is based on UBS’s global crude oil price forecasts. UBS forecasts
Brent crude oil prices of US$103.8/bbl in 2011 and US$95/bbl in 2012. We
have a normalised long-term Brent oil price assumption of US$95/bbl. Any
deviation from the above forecasts could change our investment conclusions.
Petrochemical plants are generally high-risk operations (particularly during new
plant start-ups), and accidents could significantly reduce plant operating rates,
leading to lower-than-expected earnings. Exploration and production activities
face risks such as volatility in oil and natural gas prices, and operational,
financial, geological and meteorological issues.
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