This week saw an unprecedented drop in oil prices to a negative level, almost -$40/barrel to be exact. Such a phenomenon has not happened in the past and it was largely the result of paper traders and Oil ETFs dumping their expiring May contracts “by all means” as buyers disappear.
Since then, WTI oil prices have recovered to roughly $17/barrel as of this writing, a positive figure but not a “champagne popping” price level.
IS TIME RUNNING OUT FOR KEPPEL CORP AND SEMBCORP MARINE?
The significant collapse of oil prices does not bode well for both Keppel and Sembcorp Marine. Yes, they do not derive their revenue directly from the sale of oil but indirectly in the form of newbuild contracts for production/drilling-related assets.
The problem is that with oil prices that low amid an oil glut scenario, no oil company in their right frame of mind will be contracting large newbuild orders from yards in the near term, in my view.
Can the existing backlog of Keppel and Sembcorp Marine support revenue recognition? …