2017 oil price projected to rise to US$45-US$50 from US$43 last year

While there were wide expectations for a recovery in prices, the research house believes that last year

PETALING JAYA: AmInvestment Bank (AmInvest) is keeping its oil price projection of an average of US$45 to US$50 per barrel this year from US$43 per barrel last year, stating that oil’s uncertain and volatile price dynamics will remain.

While there were wide expectations for a recovery in prices, the research house believes that last year’s oil prices’ good run might lose steam, going forward.

It pointed out that there were persistent supply-demand imbalances amid uncertainties from recovery in US shale production, potential policy changes from US president-elect Donald Trump and the European Union’s failing political cohesiveness due to Brexit on the backdrop of right-wing sentiments and immigration crisis.

“The intraday trade is expected to reach a high of US$60 to US$65 per barrel in 2017 on the back of higher oil prices that may pave the way for oil and gas firms to step up exploration and production (E&P) activities,” AmInvest said, keeping a “neutral” rating on the oil and gas sector and expecting global economy prospects, geopolitical tension and managing technology advances for efficient E&P to remain challenging in 2017 and beyond.

Investors and oil companies are now hoping for another big rally this year, more so with both Organisation of the Petroleum Exporting Countries (Opec) and non-Opec countries’ agreements to reduce oil production in an attempt to address global oversupply.

“But it is still not clear if demand can outstrip supply in 2017.

“Also, the worry is whether the Opec quotas and non-Opec agreement could be strictly complied with in 2017,” said AmInvest.

While the global economy was projected to grow by 3.3% in 2017 from 3.1% in 2016, it believes that world oil demand will improve by 1.10 million to 1.15 million barrels per day to average around 96 million to 97 million barrels per day this year.

“Slower growth from China will be compensated with improving growth from the US together with revival in eurozone, Japan, Brazil and India,” it noted.

It said a Barclays survey on global oil and gas capital expenditure projected such spending to bottom out this year. This could lead to a 5% increase for this year driven by onshore spending.

AmInvest said it might upgrade the sector should oil prices be sustained at higher levels.