Brokers' take

Regional Oil-and-Gas | Neutral

Maybank Kim Eng Research, Dec 1

OPEC's agreement - among its members - to a detailed output cut of 1.2 million bpd is sentiment positive, resulting in a rally in oil price. The cut will commence in Jan 2017, lasting six months (contingent on cooperation with non-Opec producers). That said, execution is vital. Overall, while a supply cut exercise will accelerate price recovery, attention should be on demand growth, which is more fundamental. Admittedly, the sector remains sidelined, under-owned, given the risks and unappealing prospects. However, the sector offers sporadic trading opportunities, from beta plays to attractive valuations. Our current house view for crude oil price is average US$42.50/bbl (Brent) in 2016, and US$47.50/bbl in 2017. Crude oil prices could overshoot our expectations if production is cut. Apart from Opec's policy direction, a rise in global capex and the accelerated rebalancing of the global oil demand-supply situation are the other two key signals we monitor closely for signs of a recovery. At this juncture, there are no clear indications of a turnaround just yet in the other two conditions to support a much stronger recovery in oil prices.