Research

Oil: A Tactical Trade

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Algo Research Team

Industry | Jun 06, 2023 | Views: 32

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Key Summary:

  • Low $70s oil price support from OPEC+
  • Cyclical downside but looks priced-in from positioning
  • Stocks to watch: MEDC and ELSA

After a bloody May for IHSG (-4%), led mainly by IDXENERGY (-18.4%), we see a contrarian tactical opportunity to trade in the oil sector with MEDC and ELSA as the stocks to play. Our reasoning stems from: 1). Commitment from OPEC+ to cut production when spot price trades at low $70s/barrels, which they have done twice this quarter.


2). Global oil positioning remains ultra-bearish, lowest in decade, that shows cyclical downturn has been priced-in by investors and traders. 3). Potential technical rebound in IDXENERGY as IHSG trades near strong support, while investors' cash needs to be deployed. 4). IPO to unlock value for MEDC (from Amman) in July-23 and potentially for ELSA (from PHE) in 2H23, if realized.

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