PETALING JAYA: AmInvestment Bank Research (AmResearch) has maintained its “overweight” stance on the oil and gas (O&G) sector as it believes the current oil price environment provides a trading opportunity for O&G companies.
This is especially for those which are exposed to the exploration and production subsegment as they will be able to command stronger selling prices.
“We expect to see Brent crude oil price to trade range-bound between US$70 and US$95 per barrel.
In this regard, our top pick is Hibiscus Petroleum Bhd
, which is fully exposed to the subsegment through its direct interest in four production assets in Malaysia and the North Sea, United Kingdom,” the research house said.
It added that Hibiscus expects total sales volume to be in line with its prior guidance at 7.7 million barrels of oil equivalent (MMboe) in the financial year ending June 30, 2024 (FY24).
“We also expect to see Dialog Group Bhd as a potential beneficiary due to its exposure through assets in the L53/48 field in Thailand and the D35, D21 and J4 production sharing contracts in Malaysia,” the research house said.
AmResearch has maintained a full-year 2024 oil price projection of US$85 per barrel with potential peak in in the second quarter of financial year 2024.
“We maintain our Brent crude oil price projection for now as global supply and demand levels have remained broadly within our expectations,” it explained.
It added that its projection is slightly lower than Energy Institution Administration’s (EIA) 2024 forecast which was recently raised to US$88 per barrel from US$83 per barrel on the back of the Organisation of the Petroleum Exporting Countries and its allies (Opec+) production cuts.
“We do not believe current fundamentals reflect a medium-term price level north of our forecast as a rollover of Opec+ production cuts into the second half of this year.
“We expect to see Brent crude oil prices peaking in the current quarter,” AmResearch said.
It pointed out that oil prices have begun testing the US$90 per barrel level recently following heightened concerns over energy security as the series of Ukrainian drone attacks on Russian refineries impacted 14% of the country’s primary oil refining capacity, according to estimates by Reuters.
The research house added that the Middle Eastern conflict may escalate to a regional level after an airstrike, allegedly by Israel, on Iran’s consulate in Damascus, Syria, led to the country’s vow to retaliate.
It added that Iran accounts for up to 7.6% of total oil production from Opec+ in January.
On the demand side, AmResearch said global oil consumption has been stronger than expected by the market, particularly in China.
“We gather that the country’s crude oil imports had risen by 5.1% year-on-year during January and February with oil cargo arrivals totalling 10.7 million barrels per day, data by China’s General Administration of Customs shows.
“This is in line with our expectations that the resumption of international air travel and increased activities by Chinese refiners will provide upside to the country’s oil demand in the near term,” it added.
