‘Buy’ calls on some O&G-related firms amid oil price optimism
KUALA LUMPUR: Analysts are optimistic that petroleum prices will rise towards the end of the year, following the news that the Organisation of the Petroleum Exporting Countries (Opec) will renew its commitment to curtail global oil supply.
Following this development, Maybank Investment Bank (Maybank IB) strongly recommended a “buy” call on Sapura Energy Bhd, Yinson Holdings Bhd, Dialog Group Bhd and Wah Seong Bhd.
In Vienna this week, Opec and several non-Opec producers extended a pledge to cut output by 1.8 million barrels per day until end-March next year.
Minister in the Prime Minister’s Department Datuk Seri Abdul Rahman Dahlan also announced that Malaysia was cutting its oil production by 20,000 barrels per day following the decision.
Nigeria and Libya remain exempted from these cuts, and Iran (which can produce a maximum of 3.8 million barrels per day) is allowed to increase its output under the original agreement to retain its output target.
Post the Opec meeting, Brent crude slid five per cent to US$51.46 (RM219.64) per barrel.
Maybank IB cited Norwaybased consultant Rystad Energy’s forecast of stronger oil price outlook, increase in investment spending and shale growth.
In its notes to investors yesterday, Maybank IB highlighted offshore projects’ break-even prices had fallen by up to 60 per cent since 2013.
Maybank IB gathered from Rystad Energy that shale offered a short-term commercial strategy, with a 2year investment return horizon.
Shale production is expected to grow by a million barrels per day this year.
Public Investment Bank also has an “overweight” call on the oil and gas sector.
It estimated by the end of this year world prices would average US$50 per barrel and rise to US$55 per barrel next year, as the market continued to tighten.
PIVB believes Opec’s latest decision supports current oil price levels, as stockpile reductions are expected to accelerate in the third quarter.