Oil and gas sector to remain buoyant

AmInvestment Bank Research in a report said it is maintaining its 2020 crude oil forecast at between US$60 and US$65 per barrel, amid high volatility.

PETALING JAYA: The oil & gas (O&G) sector is expected to still remain buoyant this year on the back of better crude oil projections, despite uncertainty from escalating economic headwinds.

AmInvestment Bank Research in a report said it is maintaining its 2020 crude oil forecast at between US$60 and US$65 per barrel, amid high volatility.

“With US crude inventories rising by 9% to 452 million barrels since early September, we maintain our 2019 to 2020 price forecast to US$60 to US$65 per barrel from US$65 to US$70 per barrel.

“Since the beginning of 2019, the Energy Information Administration’s Short-Term Energy Outlook has continuously revised its crude oil projections, moving its Brent oil projection between US$60 per barrel and US$70 per barrel and currently settling at US$64 per barrel for 2019 and US$60 per barrel for 2020.”

The research house is maintaining an “overweight” call on the sector, pointing out that prospects have radically brightened with rising asset utilisation globally, which supported service providers’ improving results.

“While we have ‘buy’ calls for MISC, Sapura Energy and Velesto Energy, our top picks are still companies with stable and recurring earnings such as Serba Dinamik and Dialog Group.

“We like the recurring income business model of Dialog and Serba Dinamik, which are involved in operation and maintenance services while Dialog’s earnings visibility is further secured by the Pengerang Deepwater Terminal project with its enlarged buffer zone.”

Meanwhile, Bloomberg reported yesterday that oil was poised for the biggest yearly gain since 2016, as fresh geopolitical tensions erupted in the Middle East with crude stockpiles forecast to extend declines.

“Oil has gained about 34% in 2019, buoyed by a recent breakthrough in the US – China trade dispute and an agreement by the Organisation of Petroleum Exporting Countries (Opec) and its allies to deepen output cuts.

“It’s been a tumultuous year for prices, which saw the biggest plunge in four years in August due to tariff threats on Beijing by President Donald Trump, before prices spiked the most in more than a decade in September after strikes on Saudi Arabia, ” Bloomberg reported.

Separately, Deloitte, in its 2020 oil, gas and chemical industry outlook said trade and economic headwinds are causing uncertainty for fuel markets.

“Since the 2014 price crash, global fuels consumption has grown at a rapid pace, but trade disputes and a slowdown in economic growth could weigh on 2020 oil market fundamentals.

“Demand is not the only concern, as US shale has continued to be the biggest single source of production growth year after year as investment dried up in many regions and Opec has pushed to balance the markets.”

Deloitte has forecast that US gross domestic product growth will slow in 2020, with a 25% chance of recession and only 10% chance that growth in 2020 will match recent years.

“Globally, the picture is not too different as there are a number of countries facing economic headwinds. Trade disputes have expanded to include not just Asia, but also Europe and high debts and weak currencies in several countries do not bode well, ” it said.