TA Research said Opec had reaffirmed its decision to pause planned production increases this February and March, reflecting seasonal demand softness and an already well-supplied market.
PETALING JAYA: TA Research is maintaining its “neutral” stance on the oil and gas sector, as rising global oil inventories and supply outpacing demand this year are likely to keep oil prices range-bound.
“While the Organisation of the Petroleum Exporting Countries and its allies (Opec+) maintain production discipline, China’s stockpiling and higher marginal storage costs should limit downside risks, the market remains structurally oversupplied.
“Recent Venezuela-related developments add headline volatility but are unlikely to materially affect near-term global balances, leaving oil prices primarily driven by Opec + policy, non-Opec supply growth and demand trends,” it added.
In this environment, the research house said it favours stock-specific opportunities over a broad sector call.
The research house said Coastal Contracts Bhd
offers strong earnings visibility, supported by the fully utilised Papan and Perdiz gas plants in Mexico, and a Perdiz contract secured until December 2027.
Potential capacity expansions at Perdiz and the Papan Phase 2 project, targeted for commercial operation this November, provide additional medium-term upside.
The research house said MISC Bhd remains a defensive pick, backed by stable cash flows from long-term liquefied natural gas charters and recurring income from long-life floating production, storage and offloading contracts, supporting a resilient multi-year earnings outlook.
“We maintain our average Brent crude oil forecast at US$55 a barrel for this year, as Venezuela’s constrained supply profile does not change the near-term oversupply backdrop,” the research house said.
“Opec+ supply management and rising marginal storage costs should continue to provide a stabilising floor for prices.”
Industry experts said years of mismanagement and underinvestment, compounded by sanctions, have left Venezuela’s oil industry in a deep and prolonged state of decline.
In the short term, the impact of recent developments on global oil markets is likely to remain muted, as there are no quick fixes for restoring Venezuela’s production capacity.
TA Research said Opec+ had reaffirmed its decision to pause planned production increases this February and March, reflecting seasonal demand softness and an already well-supplied market.
The group also maintained flexibility around the eventual return of the 1.65 million barrels per day of voluntary cuts, signalling that any supply normalisation would be gradual and conditional rather than automatic.
“We view this cautious stance as a deliberate effort to anchor price expectations and limit downside risks, particularly as non-Opec supply growth and weak near-term demand continue to weigh on fundamentals.
“Overall, actions by Opec+ underscore its preference for policy optionality and proactive market management, rather than reacting mechanically to geopolitical events with limited direct supply impact,” the research house noted.
