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UBS Investment Research
Asia Oil Explorer
G asoline drives refining margins up
US crude inventories fall more than expected
The WTI crude oil price rose 4.8%, ending last week at US$83.0/bbl, while Brent
crude rose 1.5% to US$105.9/bbl. The WTI crude price posted the highest weekly
gain in seven months on larger-than-expected growth in US jobs and bullish crude
inventories. According to the US Department of Energy (DOE), for the week
ended 30 September, crude inventories fell 4.7mbbls to 336.3mmbls, the lowest
level since January 2011. The big draw came in as imports declined 1mbpd to
8.7mbpd. Product stocks also declined, with gasoline and distillate stocks falling
1.1 and 0.7mbbls, respectively.
Refining margins surge WoW; petchem spreads rise
The Reuters Singapore complex refining margin index averaged US$11.9/bbl last
week, up from an average US$9.5/bbl the previous week. Gasoline spread (to
Dubai crude) rose US$4.2/bbl WoW, while the diesel spread rose US$2.4/bbl.
Ethylene spread (to naphtha) rose 14.9% WoW, while the HDPE spread rose 7.0%.
PX-naphtha spread, on the other hand, fell 7.3% WoW to close at US$695/t.
Oil and gas stocks have declined in the past month
For the month ended 10 October and based on simple average performance, E&P
stocks in Asia under UBS coverage fell 6.0%, while, on an average, refining and
integrated stocks fell 6.3% and 7.0%, respectively.
Top picks
Our most preferred stocks in Asia are Sinopec, 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
G asoline drives refining margins up
US crude inventories fall more than expected
The WTI crude oil price rose 4.8%, ending last week at US$83.0/bbl, while Brent
crude rose 1.5% to US$105.9/bbl. The WTI crude price posted the highest weekly
gain in seven months on larger-than-expected growth in US jobs and bullish crude
inventories. According to the US Department of Energy (DOE), for the week
ended 30 September, crude inventories fell 4.7mbbls to 336.3mmbls, the lowest
level since January 2011. The big draw came in as imports declined 1mbpd to
8.7mbpd. Product stocks also declined, with gasoline and distillate stocks falling
1.1 and 0.7mbbls, respectively.
Refining margins surge WoW; petchem spreads rise
The Reuters Singapore complex refining margin index averaged US$11.9/bbl last
week, up from an average US$9.5/bbl the previous week. Gasoline spread (to
Dubai crude) rose US$4.2/bbl WoW, while the diesel spread rose US$2.4/bbl.
Ethylene spread (to naphtha) rose 14.9% WoW, while the HDPE spread rose 7.0%.
PX-naphtha spread, on the other hand, fell 7.3% WoW to close at US$695/t.
Oil and gas stocks have declined in the past month
For the month ended 10 October and based on simple average performance, E&P
stocks in Asia under UBS coverage fell 6.0%, while, on an average, refining and
integrated stocks fell 6.3% and 7.0%, respectively.
Top picks
Our most preferred stocks in Asia are Sinopec, 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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