Oil

Oil: US crude WTI slipped back below US$60 a barrel after touching 2015 highs, on renewed concerns about global oversupply as the recent drop in US inventories was attributed to weaker imports rather than a decline in US production.

Market observers have cited that the recent rise from US$47 at mid-Mar do not correspond to an actual improvement in the supply-demand fundamentals.

In addition, the recent gains have encouraged a fresh flood in supply, reflected by the hike in production forecast of US-listed Devon Energy and Noble Energy, which reported their first-quarter results this week.

Moreover, while the international oil companies such as ExxonMobil and Royal Dutch are slashing budgets and shelving projects, state-owned Mid-East oil giants Saudi Aramco, Adnoc and Kuwait Petroleum Corp are taking the opposite tack and increasing investments to boost their production and market share.

Analysts are now expecting oil price weakness to return amid the oversupply situation, which could heighten continued fragility in SGX-listed O&G counters.

So far, the drastic cuts in capex by upstream industry players have led to the dearth of new orders for offshore companies at the lower end of the supply chain, and margins are expected to narrow as projects up for tender see more aggressive bidding.

Maybank-KE is underweight the sector and favours Ezion (Buy, TP $1.83), which has the most resilient earnings.