EXPERTS UPBEAT ON O&G SECTOR

Opec output cut, advancements and developments in oil-producing countries expected to drive market

OIL and gas (O&G) experts believe the industry evokes much optimism for the services sector — in line with Petroliam Nasional Bhd’s (Petronas) higher capital expenditure (capex) expectation of more than RM50 billion this year, from RM47 billion last year.

According to Petronas Activity Outlook report for 2019-2021, upstream activities will receive a higher allocation of about RM30 billion compared with downstream activities.

“We maintain our US$65 (RM265.85) per barrel average oil price forecast for this year. Apart from the Organisation of the Petroleum Exporting Countries’ (Opec) cut and other geopolitical developments, developments in the oil-producing countries and shale development in the United States are also key monitors in driving the oil market, in terms of direction and price volatility,” said Maybank Investment Bank Bhd (Maybank IB) last week.

It said there was a mixed affair in the recently-concluded results reporting month.

It said Petronas’ results reflected global peers’ trend of improved earnings as the national oil company spent more on capital expenditure and dividends.

“Firms that have recapitalised with lean balance sheet will be able to positively leverage this. Others like Bumi Armada Bhd, Barakah Offshore Petroleum Bhd and offshore support vessel players will still need to address their financials and reinvent to remain relevant in this cyclical recovery.”

Maybank IB said Opec’s announcement on output cut in the middle of this year would be closely monitored, as it would shape the oil price direction in the second-half of this year.

“An extension of the existing output cut of 1.2 million per barrel up to end of this year will ensure a price level of over US$60 per barrel.”