RHB Research has made an “Overweight” recommendation on the Oil & Gas sectors in Malaysia and Thailand with stock-picks as Petronas Chemicals, Bumi Armada, PTT, and PTT Exploration & Production.
It said that exploration & production and petrochemical companies should continue to enjoy strong earnings while riding on better commodity prices.
It said that services players should gradually benefit from higher activities and increased domestic capex allocations
RHB said that it raised Brent crude oil price forecasts to USD83.00-70.00/bbl (from USD69.00-65.00/bbl) for 2022-2023, to reflect a stronger than expected demand despite an environment with a widespread Omicron variant, lower than expected supply pressures, and risk premium, amidst geopolitical uncertainties.
It said that based on available data, crude oil demand should increase by 4.2 mbpd in 2022. “We expect oil prices to trend higher to an average USD90/bbl in 2Q22 due to elevated geopolitical tensions in the near term,” it said
The research house said that the oil market should theoretically enter a surplus of 1.8 mbpd this year if demand is in accordance with OPEC’s latest projection.
However, it said that the recent escalation of tensions between Russia and Ukraine as well as the Yemen conflict in the Middle East involving Houthi, the UAE, and Saudi Arabia could pressure the global spare capacity as the OECD oil stocks are at a seven-year low.
It said that Saudi Arabia and the UAE are OPEC’s top and third oil producers, with 9.9 mbpd and 2.9 mbpd respectively in Dec 2021. Bloomberg data shows that Saudi Arabia and the UAE have the biggest spare capacity among the OPEC members, at 1.5 mbpd and 1.3 mbpd respectively.