O&G sector expected to continue trading sideways

KUCHING: The oil and gas sector is expected by analysts to continue trading sideways while they have also projected gradual increase in capital expenditure (capex) in the upstream segment.

According to the research arm of Hong Leong Investment Bank Bhd (HLIB Research), average Brent crude oil prices weakened 7.5 per cent sequentially to US$49.6 per barrel (bbl) in the second quarter of 2017 (2Q17) (compared to US$53.6 per bbl for 1Q17) due to increase in US crude oil production.

“As per latest update from Baker Hughes earlier this month, US land rig stood at 927 rigs, further reaffirming US oil production ramp up being the major contributor to the weak oil prices,” HLIB Research said.

HLIB Research noted that the Energy Information Administration’s (EIA) forecast implies that world oil demand would be strong in the second half of 2017 (2H17) due to seasonality.

The research arm further noted that sizeable world oil inventory drawdown is expected to occur in 3Q17 by an estimate of 0.4 million bbls per day due US summer driving season.

“Draws on oil inventory is expected to taper off in 4Q17 before inventory build-up resumes in 2018,” it said.

In 1H17, Brent has averaged at US$51.6 per bbl, still within HLIB Research’s forecast range of US$50 to US$60 per bbl for whole year of 2017 albeit at the lower end.

The Labuan- based Sabah g government-linked company is expanding its business operations into halal distribution as part its diversification plan.

Chief executive officer Datuk Harris Annuar Tan said the diversification was necessary to complement its core business activity of being the logistics hub for the oil and gas (O&G) industry.

“Under the current economic situation, we must look at other avenues to complement and expand our core business… the growth of

Harris said ASB, established more than three decades ago, has gone through tremendous transformation and has earned international recognition from international O& G firms.

“As such, ASB has the expertise to provide halal- certified facilities and infrastructure as we are capable of creating clearly demarcated halal storage zones.

“ASB has been recognised as among the world’s best logistics base, given its facilities and infrastructure, thanks to the support of Sabah Chief Minister Datuk Musa Aman who ensured ASB continued to help prosper the Labuan economy,” he said.

Hariss said given ASB’s capability and experience as a logistics hub, it would continue to serve O& G players and simultaneously facilitate halal trade shipment.

Labuan’s strategic location within the Asean region has made ASB most suited for the role as the main gateway to provide integration of logistics services for halal entrepreneurs wishing to market their products to other countries in the region.