Brokers' take

Oil and gas sector

DBS Group Research, June 27

The Brexit decision has triggered higher risk aversion, which will likely make it more difficult for oil to trade sustainably above the US$50/bbl level in the near-term. Simon Flowers, chairman of global oil consultancy Wood Mackenzie, has suggested that companies considering investments in the North Sea will defer these until there is clarity on the effects of Brexit, while smaller operators should find it difficult to raise capital. As funding continues to dry up and credit becomes more expensive, we should see more oil-and-gas players in distress globally, a much-needed "cleansing" for the industry that will help drive a return to profitability; M&A activity should also pick up.