PETALING JAYA: With the oil price expected to remain “higher-for-longer” at the range of US$80-US$90 (RM373.12 – RM419.76) per barrel in the medium term, the oil and gas (O&G) industry players can foresee a positive outlook for their operations, said Hong Leong Investment Bank (HLIB).
The research house has maintained its “overweight” rating on the O&G sector and revised its target Brent crude oil forecasts for 2023-2024 at US$85 (RM 396.44) per barrel and for 2025 at US$80 (RM373.12) per barrel.
“Downside risks to our projections include reactivation of spare capacity from the Organisation of the Petroleum Exporting Countries (Opec) in the near term, China’s slower-than-expected oil demand growth and de-escalation of geopolitical conflicts,” it said in a note today.
HLIB also pointed out that the limited supply capacity growth could also influence oil prices movements due to the projected slowdown of shale oil output growth and impending restocking activities of the US Strategic Petroleum Reserve (SPR).
The investment bank said the US SPR is at its lowest level since 1983 at 351 million barrels as of September 2023.
“The US energy department seeks to purchase 6 million barrels of crude oil for delivery to the SPR in December 2023 and January 2024 at US$79 (RM 368.46) per barrel or less.
“These replenishment activities are expected to limit some downside risk to oil prices going forward,” it added.
On the Israel-Hamas conflict, HLIB said it did not foresee immediate supply risk from the region.
HLIB’s top picks for the sector with “buy” recommendations are Bumi Armada Bhd (target price (TP): RM0.69 sen), Hibiscus Petroleum Bhd (TP: RM3.22), and Wasco Bhd (TP: RM1.27).
