‘Buy’ calls on some O&G-re­lated firms amid oil price op­ti­mism

New Straits Times - - Business / News -

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.

Datuk Seri Ab­dul Rah­man Dahlan

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