-Faye is both a fundamental analyst and economist by nature. She is a global thinker who’s open-minded and enjoys learning from the market.
-Calvin is a fundamental analyst at heart and an ardent disciple of value investing. He relishes the process of searching for undervalued stocks and enjoys collecting dividends from his stocks.
-Gordon has a demonstrable interest in equity investments, financial markets, and negotiating deals. As @NTUInvestmentClub president, he has an understanding of what factors drive an organisation’s success.
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Sector Overview: O&G
Oil and Gas Industry is a key pillar of Singapore’s economy, accounting for 5% of the country’s GDP. In 2009, this industry contributed S$57 billion (US$43.4 billion) to Singapore’s total manufacturing output. Singapore is one of the world’s top three export refining centres and the world’s third largest oil and oil products trading hub, making it the undisputed oil hub in Asia. The centre of oil and gas activities is Jurong Island – home to more than 95 leading oil and gas, petrochemicals, and specialty chemicals companies from around the world. Singapore is home to Asia’s largest physical oil trading hub, world’s largest bunkering port and the world’s two largest oil rig builders SembCorp Marine and Keppel Corporation.
In the long-term, the strategy for oil and gas involves capitalising on the strengths of multiple, related sectors that form the thriving energy eco-system in Singapore. The presence of major oil and gas companies has also spawned a market for the world’s leading oilfield services and equipment companies who provide regional support from Singapore.
Macro trends for Oil
1. OPEC Landmark Deal
OPEC met on 30th November, in which the group reached a landmark consensus and agreed to cut output by approximately 1.2 million barrels per day beginning January 2017 for six months (extendable by another six months, depending on prevailing market conditions). This would reduce OPEC’s output ceiling to 32.5 million barrels per day.
2. Geopolitical and Economic Events
Oil prices have responded to geopolitical and economic events over the past decades. In 2017, political risks are escalating. With the recent French elections behind us, we can only wait and see how things develop in Germany and Netherlands. These election cycles will happen against a backdrop of continued citizen unrest and economic crises. In addition to the European elections, Britain will continue to negotiate its exit from the European Union, which will be a tediously long process. In the US, with President Trump passing his 100 days in office, uncertainty remains high on whether he will deliver his promises by introducing new effective policies and changes. All these events will trigger the volatility of oil prices in 2017.
World economic growth forecasts remain unchanged at 3.1% for 2017. This is an increase of 0.2% from 2016, when growth was forecasted at 2.9%. This slight increase means that global consumption of oil will support increased industrial activity levels, creating a positive scenario for oil prices.
Macro Trends: Rise in LNG
Global demand for natural gas is rising and expected to make up 30% of the global energy mix by 2035. As natural gas emits 50% less carbon dioxide than coal and 20-30% less than fuel oil, it has become a popular source of power generation due to its abundance, reliability, and affordability. To meet growing demand, expenditure on LNG facilities and carriers are expected to rise to over US$240 billion from 2016-2020, a 34% increase over the previous five years. At the same time, there are new developments outside the traditional LNG space that present new opportunities, such as the growth of small-scale LNG.