Maybank IB: Oil Market To Remain Strong In 2023, OPEC+ Playing Its Role

Maybank IB expects the oil market to remain strong in 2023, it added that OPEC+ will continue to play its role as a formidable swing producer, which will ensure a strong oil price outlook. The energy tri-lemma: strong global oil demand (China), supply disruption due to past structural under-investment, and continued geo-political tension will continue to pan out in 2023.

The research house said its USD100/bbl oil price outlook for 2022- 23 remains. Counters on BUY call include Yinson, Dialog & Hibiscus.

The OPEC+ group, led by Saudi Arabia and Russia, has decided to leave its production quotas unchanged. The group will stick to the earlier agreed Oct 2022 plan to cut output by 2m bpd, which amounted to an effective production cut of 1m bpd (with Russia & Saudi sharing the output cut equally) from Nov 2022 until end-2023. The group’s next meeting is scheduled in Feb 2023 with the one after on 4 Jun 2023.

The decision was hardly a surprise said Maybank IB, with the oil market responding well to the outcome. It is also observed that the coalition remains strong, coordinated, and disciplined; a positive in bringing stability to the oil market amidst the US’ push for a lower oil price scenario via an increase in production and the G7 + Australia’s decision to place a price cap, at USD60/bbl on Russia’s oil supply. For that matter, we reckon the pact will further manage production, asserting its role as a ‘swing producer’ for a steadier oil price outlook (USD90-100/bbl). Russia’s Deputy Prime Minister Alexander Novak has come out to oppose the price and will redirect its oil supply to ‘market-oriented’ partners or reduce its production.

The USD100/bbl (dated Brent) oil price estimates for 2022-23 are unchanged, with an upside bias but does not rule out a higher oil price outlook in FY23 considering the continued tightness in the global supply market, due to the prolonged structural under-investment since 2015 and demand for oil projected to pick up in 2023, with the re-opening of China’s economy and increased flight travels worldwide. A widening imbalance will lead to a higher oil price scenario.

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