Energy & Power Sector: Investment case intact despite oil price weakness – KASB Research
By: KASB Securities & Economics Research
Energy & Power Sector: We believe global crude oil markets are set to soften in coming months, recovering from widespread oil supply disruptions this summer and the US shale revolution which continues to push up US domestic crude oil production.
Our investment case for Pak E&Ps is unhurt despite the decline in oil prices as our base estimate of average oil price for FY14E stands at US$99.5/bbl (Current FYTD average stands at US$108.72/bbl).
We estimate earnings sensitivity of 6.5% and 6.2% for PPL and OGDC for every 10% change in oil price in FY14.
A modest improvement in global economic growth should support oil demand. However, we remain concerned by the lack of growth momentum in EMs. Higher US interest rates, EM FX depreciation and the subsequent flow of capital out of EMs does not bode well for oil prices.
Read More>> Energy Sector