KUALA LUMPUR, March 9 — KAF Equities Sdn Bhd has downgraded the oil and gas (O&G) sector to "neutral” from "overweight” following the shocking collapse in oil prices.

Oil prices sank after Russia ended its alliance with the Organisation of the Petroleum Exporting Countries (Opec) and the oil cartel responded by removing all limits on its production after the current output cut deal expires at the end of this month.

The global crude oil benchmark, Brent, dropped 20.63 per cent to US$35.93 per barrel this morning while US benchmark, West Texas Intermediate, fell to a low of US$30 a barrel

KAF Equities said it was uncertain how long the low oil prices would persist, as the oil supply risk should further aggravate the already weakened demand caused by the ongoing COVID-19 outbreak.

"Contract renegotiation risks would likely rise for upstream contractors, especially those locked in during significantly higher oil prices,” it said in a research note today.

The stockbroking firm said it had also downgraded five stocks in its coverage that were expected to be affected by bearish oil prices.

They include Petronas Chemicals with a new recommendation of "hold” and target price (TP) of RM4.91, Coastal Contracts (Hold, TP: RM0.82), Bumi Armada (Hold, TP: RM0.19), Yinson (Hold, TP: RM6.01) and Sapura Energy (Sell, TP: RM0.07).

On the other hand, KAF has maintained a "buy” recommendation on MISC and Serba Dinamik in the current scenario. — Bernama