Oil-related plays under pressure

Oil prices are under renewed pressure, after the Organization of Petroleum Exporting Countries (OPEC) decided not to take any action relieve the supply glut.

Liquid oil
Source: Bloomberg

Ahead of its meeting in Vienna, market watchers were split on whether the cartel would be able to reach an internal consensus to cut its overall production, of 30 million barrels per day, to prop up prices.

With the conclusion of the meeting yielding no support for prices, we’ve seen a sell-off in crude oil. The price of Brent dropped 6.6% overnight and its pushing new four-year lows.

Looking at today’s Asian stock markets, we’re also seeing the bearishness spill over to oil-related plays.

On the Singapore Exchange, oil-related plays are among the top losers and putting a lid on any gains by Straits Times Index (STI). Oil and gas services account for 5.6% of the STI, based on Bloomberg data.

Among the Singapore-listed companies under the pump are Keppel Corp, SembCorp Marine, SembCorp Industries, Triyards, Ezra, and Ramba Energy.

It’s a similar picture on the ASX, with top losers in the forms of exploration and production firms. These include Oil Search, Drillsearch, Santos and Horizon Oil.

Zooming in at SembCorp Marine, its stock price has plunged over 23%, now in line with oil prices. It is under its 20, 50 and 200 DMAs suggesting that a bearish bias remains and it is likely to respect the downtrend line.

Traders can watch out for a clear break of its recent support level of $3.30, as an indication of further downside.

It may be worth noting that based on RSI indicator, the stock has been severely oversold, so there may be some short covering in the interim. However, in order for SembCorp Marine to gain enough upward momentum for a potential reversal, the first obstacle it will need to clear is a break above its resistance of $3.40.

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