Oil prices may have surged yesterday after Opec's move to curb production, but investors should not expect a longer-term explosive recovery, leading analysts said.
And even as energy market conditions improve, Singapore offshore and marine firms are unlikely to enjoy much immediate benefit, the Credit Suisse market experts added.
The Swiss bank held its 2017 investment outlook briefing yesterday, after the Organisation of Petroleum Exporting Countries struck a deal to cut production.
The news sent two key oil benchmarks, Brent crude futures and West Texas Intermediate (WTI), surging almost 10 per cent overnight, with WTI briefly rising above the US$50-per-barrel level.
Credit Suisse investment strategy head Nannette Hechler-Fayd'herbe believes the recovery is sustainable - to some extent.
"We see only limited chances of (WTI) going way above US$60. Above this level, many US shale projects will turn profitable again and the production will just restart… Our 2017 target is somewhere in the upper US$50s."
Ailing oil prices have been a major drag on Singapore's corporate, banking and investment sectors. Share prices of oil rig builders such as Keppel Corp and Sembcorp Marine have dived. Smaller firms such as Swiber and Swissco have filed for judicial management.
For oil-related firms still afloat, it is not yet the end of the tunnel, Asia-Pacific equity investment strategist Suresh Tantia warned.
"Unlike in the US, the oil-related industry here is downstream, which is dependent on the upstream explorers and producers, so the benefit of higher oil prices will lag," he told The Straits Times. "Among the Singapore firms, there is still stress on the corporate debt side, and we don't see a sustainable recovery unless oil prices go beyond US$60 - which we also don't expect to happen."
A better way for investors to benefit from the Opec-related sentiment is through currencies, particularly the Russian rouble and Norwegian krone, Credit Suisse senior Asia-Pacific currency investment strategist Heng Koon How added.
Credit Suisse expects the US economy to grow 2 per cent next year, up from the forecast 1.5 per cent growth this year. But the Wall Street bull run may taper off, and US equities are set to offer just about 3 per cent of total return next year, as "the market has already priced in all the good news", Ms Hechler-Fayd'herbe said.
Singapore's benchmark Straits Times Index will largely stay range-bound next year, dipping to about 2,880 points in three months and 2,920 in 12 months, Mr Tantia said. The STI closed at 2,928.58 yesterday.
Wong Wei Han
