Oil price optimism

Maybank IB said its key buy calls are on these stocks – Dialog Group Bhd, Icon Offshore Bhd, Malaysia Maring and Heavy Engineering Holdings Bhd, Wah Seong Corp Bhd and Yinson Holdings Bhd.

PETALING JAYA: Analysts have become more optimistic on the crude oil price outlook, thus raising their price forecasts on the commodity.

Maybank Investment Bank Research (Maybank IB) in its report said it had raised its crude oil price assumption to US$55-US$60 per barrel for 2021 from US$45-US$50 per barrel before.

“Our revised estimates are generally in line with consensus (EIA & Fitch Solutions: US$53 per barrel). A more promising Covid-19 vaccine development/outlook and the effect of underinvestment kicking in could further elevate optimism in the oil market, ” Maybank IB said.

It noted that the fundamentals of the global oil demand still remained soft but could potentially be on a course for a recovery

Its price this year is still expected to fall short of its pre-Covid-19 level in 2019, the research house said.

“In our view, the improved optimism on oil prices is mainly triggered by the weather disruption and supply cut effect.

“The unusual polar vortex disruption which was stronger and longer than usual has wreaked havoc this year, which meteorologists are calling one of the biggest, nastiest and longest-lasting since the 1950s, bringing about a record freeze and crazy weather events to the Northern hemisphere, knocking off power grids, disrupting energy supply and drawing down crude inventories, ” Maybank IB said.

It also noted that Saudi Arabia’s recent move to pledge extra, voluntary production cuts of one million barrels per day in February to March 2021 has led to a tighter oil supply situation.

Maybank IB said its key buy calls are on these stocks – Dialog Group Bhd, Icon Offshore Bhd, Malaysia Maring and Heavy Engineering Holdings Bhd, Wah Seong Corp Bhd and Yinson Holdings Bhd.

Meanwhile, RHB Research said its Brent crude oil price forecasts have increased to US$57 per barrel from US$51-US$55 per barrel for 2021-2022.

RHB Research said that it is more convinced on the recovery in the demand for oil, especially in in the second half of this year.

“This would be mainly driven by the recovery in demand for transportation fuel, premised on the rollout of Covid-19 vaccines and large-scale stimulus packages worldwide, ” RHB Research said.

For the Malaysian oil and gas sector specifically, RHB Research said it is neutral on the outlook with top picks being MISC Bhd and Bumi Armada Bhd.

“Despite lifting our crude price forecast for 2021-2022 to US$57 per barrel, we see limited upside from current levels, as Opec is able to increase production to accommodate a demand recovery.

“We maintain our long-term oil price estimate at US$60 per barrel, ” RHB Research said.

Commenting further on the outlook for Malaysia, it said that its estimate for Petroliam Nasional Bhd’s 2021 capital expenditure is largely unchanged at RM40bil-RM45bil.

It noted that there are buy-on-weakness opportunities, especially on big caps such as Dialog and MISC which had recently reported weak quarterly results.

“We expect them to register better earnings in the second half of this year, ” RHB Research said.

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