‘Overweight’ stance on oil and gas industry

KUALA LUMPUR: The oil and gas sector remains precarious amid severe weather in the United States and Saudi Arabia’s output quota.

AmInvestment Research said the oil price outlook remained precarious even though the Brent crude oil price had risen to US$64 per barrel versus its unchanged crude oil price forecast of US$50 to US$55 per barrel for this year and US$55 to US$60 per barrel for 2022.

This is given the 14 per cent drop in US crude inventories to 463 million barrels currently from the all-time high of 541 million barrels in June, it said.

The drop was due to the unusually cold US weather in February, disrupting Texan production together with Saudi Arabia’s production cut of one million barrels per day, it added.

However, the firm said US shale production could rebound when the weather improves while the Organisation of the Petroleum Exporting Countries and allies’ quota might unravel given the brighter oil price environment amid weak global demand.

AmInvestment Research said as for local operators, it had seen improving prospects despite weak order flows in the fourth quarter of last year.

Excluding Serba Dinamik Holdings Bhd’s civil and information, communication and technology jobs in the United Arab Emirates (UAE), new contract awards last year for Malaysian operators tumbled 42 per cent year-on-year to RM6.6 billion, it said.

“However, including Serba’s lumpy UAE projects, the 2020 new orders instead rose 38 per cent year-on-year to RM15.8 billion. New project rollouts were still sluggish in the fourth quarter of last year as fresh jobs fell 32 per cent year-on-year to RM1.5 billion.”

The research house has maintained an “overweight” stance on the sector with eight “buy” calls and one “hold”.