Given the potential slowdown in the global economy, we believe that the price of crude oil will trend lower in tandem with easing demand as industrial activities slow down. Hence, we are revising downwards our oil price forecasts for FY11 and FY12 to USD85-USD95/barrel and USD80-USD90/barrel respectively. Nonetheless, we are still overweight on the O&G sector even as we pare down the average PER multiple for the sector. We believe the current ‘desperate’ selldown is an over-reaction given the loss of confidence in the overall market. Our top picks are Kencana, Dialog and Perdana Petroleum.
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