PETALING JAYA: Crude oil prices are expected to strengthen further as a result of production cut by the Organisation of the Petroleum Exporting Countries and allies (Opec+). This will give a boost to oil and gas stocks in Malaysia.
Currently hovering around US$80 to US$85 (RM353 to RM375) per barrel, global benchmark Brent crude will likely rally towards US$100 (RM441) per barrel in the near term.
Maybank Investment Bank (Maybank IB) Research is one such brokerage projecting this.
Keeping its “positive” stance on the overall oil and gas stocks on Bursa Malaysia, Maybank IB Research reiterated its oil price forecast at US$100 (RM441) per barrel, with an upward bias.
“Oil price could sustain above U$100 (RM441) per barrel should the Opec+ alliance take a stand to seeing an elevated oil price policy over higher output,” the brokerage wrote in its recent report.
“This would further tighten the global supply market, which is already being affected by the prolonged structural under-investment and rising demand outlook (underpinned by China and the aviation sector),” it added.
The Opec+ group on Monday collectively decided to voluntarily cut crude oil production by up to 1.66 million barrels per day (bpd) from May 2023 to December 2023. Russia and Saudi Arabia would take the lead on the cut, pledging to reduce its output by 500,000 bpd each.
“Putting things into context, the 1.66 million bpd cut represents about 2% of the world’s market supply.
“The planned production cut will undoubtedly tighten the global supply-demand balance, removing a short-term supply overhang and raise the oil price’s floor price to US$80 (RM353) per barrel,” Maybank IB Research said.
“This move reiterates our view that the Opec+ alliance remains very much a relevant “swing oil producer”; is still disciplined and strong, as a collective force, in shaping the direction of the oil market (production and oil price); and is gradually pivoting away from the United States’ influence and direction,” it added.
Further, Maybank IB Research said the cut also made sense, considering the fact that the sector had been facing the challenge of raising production, following years of under-investment since 2014.
For small and mid-capitalisation “buys”, it recommended Icon Offshore Bhd, Malaysia Marine and Heavy Engineering Holdings Bhd and Wah Seong Corp Bhd.