RHB is overweight in the Oil & Gas sectors with its top picks being Petronas Chemicals, Bumi Armada, PTT, and PTT Exploration and Production.
It said that it increased its 2022-2023 Brent crude oil price projections to USD90.00/bbl and USD75.00/bbl.
The research house said that in the near-term oil prices could be fuelled by the continuous heightened geopolitical tensions. “Oil prices could potentially hit USD110.00-120.00/bbl if Russia decides to invade Ukraine, and these could stay elevated for longer, depending on the magnitude of the event,” it said.
RHB said that exploration & production and petrochemical companies should continue to enjoy strong earnings while riding on stronger commodity prices. “Service providers should gradually benefit from a pick-up in activities and increased domestic CAPEX allocations,” it said
The research house said that as Russian troops and military equipment are positioned within reach of Ukraine’s borders, and the discussion between Russia and the US did not result in a material breakthrough at the time of writing, oil prices are likely to remain bullish pending a resolution.
RHB said that it was reported that French President Emmanuel Macron has referred to the 2015 Minsk Agreement between Kyiv and Moscow as the blueprint for a breakthrough in the Ukraine crisis.
“We expect oil prices to trend higher to an average USD100.00/bbl in 2Q22, and but still assume there will be no massive supply damage in the longer term. Oil prices could potentially hit USD110.00-120.00/bbl if the war materialises, and will stay higher for longer – depending on the magnitude of the event,” it said.
RHB said that keep a relatively lower price forecast at USD80.00-88.00/bbl in 2H22 on the back of higher supply pressure from OPEC+, in accordance with its production schedule and a potentially stronger rebound in US production levels, as the country’s rig count is still on the rise.
“US Energy Information Administration’s (EIA) forecasts on US oil production in 2022 and 2023 were revised upwards to 12mbpd and a record 12.6mbpd (from 11.8mbpd and 12.4mbpd) in its latest monthly report,” it said.
