Monday, June 19, 2006

High oil prices key to stock market performance

Some predictions for the stock market performance in the case of USD100 priced Brent oil.

  • Aton analysts: RTS will exceed 2500 points. Gazprom could double its market capitalisation, SurgutNefteGas’s share price will rise by 84 percent and TNK-BP’s by 83 percent.
  • UBS: Gazprom will be 2.8 times more expensive, Lukoil – 3 times, TNK-BP – 2.6 times and SurgutNefteGas – 2.3 times.
  • BroketCreditService: TNK rising by 22 percent and SurgutNefteGas by 27 percent.

Oil priced as it is now, at USD70 per barrel.

  • UBS: Gazprom’s share price will increase by 93 percent, Lukoil by 124 percent, SurgutNefteGas’s by 75 percent and TNK-BP’s by 162 percent.
  • Troika Dialog: After 2008, Lukoil will be 3.5 times more expensive, TNK-BP – 3 times and SurgutNefteGas 2.5 times.
  • BroketCreditService: Lukoil will be 1.5 more expensive and TNK-BP will increase its market cap by 25 percent.

It remains to be seen if the oil price will increase. Some analysts believe that the oil price has peaked with USD50 being the likely price for the future. Others, most notably Goldman, believe that oil could go as high USD105 per barrel. Additionally, some investors go by such indicators as oil futures which seem to point to oil priced in the region of USD70 in the next few years. Does the investor’s outlook on oil prices dictate whether he or she should buy Russian blue-chips now? Moscow-based Kazimir Partners seems to think so while others will disagree.

Oil Bourse

There are some fears that the high oil prices will mean that oil will not be traded on exchanges, with direct contracts between the government and the client prevailing. The January debut of the oil burse could have problems, as the private oil companies do not have the necessary availability of oil in order to trade it on the domestic exchange. In order for the oil bourse to be a success, there needs to be liquidity, something which will be difficult to accomplish even if state-owned companies will be given the order to provide a minimum amount of products to be traded.

Vedomosti, The Economist, RusEcon, Gazeta

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