Maybank Investment Bank (Maybank IB) maintained POSITIVE stance on the oil and gas (O&G) sector in its 2024 Outlook Note, saying that the sector will be buoyant but volatile.
“Our general thesis on the Malaysia Oil & Gas sector has not changed much since our previous report.
“As United States’ Energy Information Administration (EIA) has forecasted a record-high demand for oil in 2024 to 2025E, we think that the elevated crude oil price environment will be here to stay in the medium term,” it said today (Jan 11).
The research house also maintained its in-house Brent Oil assumption of USD80 per barrel for 2024E and expected Brent oil prices to remain elevated throughout the year with much volatility in sight.
It reckoned that the oil markets will continue to face the energy tri-lemma in 2024 between improvement in demand, as EIA forecasts record-high demand of 102.34 million barrels per day (mbpd); supply tightness due to structural under-investments; and potential geo-political risks, trade wards and embargoes.
“These factors will continue to induce volatility in the oil markets, in our view,” said Maybank IB.
The research house said crude supply and demand gap will also narrow in 2024.
In EIA’s latest Short-term Energy Outlook (STEO) report in December 2023, it expects a net crude oil deficit in 1Q24 with world consumption slightly eclipsing production by 0.8 mbpd.
“EIA also forecasted a record-high crude oil consumption with expectations that the supply-demand gap to be harshly narrow expecting supply deficit at an average of 0.15 mbpd throughout the year,” it said.
According to Maybank IB, in the latest OPEC+ meeting on Nov 30, the organisation and its allies agreed to voluntarily cut outputs by 2.2 mbpd until the end of 2024, led by Saudi Arabia rolling over its current production cuts – to support the stability and balance of oil markets.
“Going forward, we expect further output cuts from OPEC+ if prices do not hold above USD75/bbl. OPEC contributes to more than 30% of global oil production.
“With the organisation and its allies’ efforts to continue curtailing production in 2024E, we expect oil supply to remain tight in the foreseeable future,” it said.
The research house said in Petronas Activity Outlook (PAO) 2024 to 2026, Petronas has hinted the sizeable capex in 2024E.
“Based on our yearly observations, Petronas has to decide on how it is to strike a balance between three major decisions, capex spending, dividend commitment and balance sheet preservation.
“As at end-Sep 2023, Petronas sits on a net cash position of RM96.7 billion. Given a lower dividend commitment of RM32 billion for 2024 (per 2024 Fiscal Outlook Report from RM40 billion in 2023) despite higher average Brent crude oil price expectation of USD85 per barrel (Petronas forecast).
“We see the possibility of Petronas capex being sizeable, with most subsegments seeing increased investment in 2024E, in our view,” it said.
Maybank IB said companies under our coverage, Yinson Holdings Bhd (Yinson), MISC Bhd, Bumi Armada Bhd, Icon Offshore Bhd, and
Dialog Group Bhd (for which we have BUY calls on) are key potential beneficiaries of the ramp-up of activities stated in the PAO2024 to 2026 document.
“We also think that 2024 will be a good year particularly for Dayang Enterprise Holdings Bhd (DEHB MK, Not Rated, CP: MYR1.71), Petra Energy Bhd (PENB MK, Not Rated, CP: RM0.985) and Carimin Petroleum Bhd (CARIP MK, Not Rated, CP: RM0.885) due to the large ramp-up in machinery condition monitoring (MCM).
“(This is) coupled with the increase in requirements of offshore support vessel (OSV) as Dayang and Petra has exposures in this sub-segment,” it added.
Its top picks for the sector are Yinson, Icon Offshore, Velesto Energy Bhd and Wasco Bhd.
