Oil price to be between US$55 and US$65 a barrel this year – HLIB

KUALA LUMPUR: Hong Leong Investment Bank (HLIB) expects oil price to be between US$55 and US$65 (US$1 = RM3.97) per barrel this year as rising geopolitical tensions may cause sudden supply shortages which could disrupt current balanced market.

In a research note yesterday, the investment bank said, global oil demand could expand again by 1.51 million barrels per day (bpd) and non-Organisation of the Petroleum Exporting Countries’ (OPEC) supply rose by 990,000 bpd.

The gap is likely to be filled by OPEC production, which is expected to stand at 33.2 million bpd, representing a growth of 700 million bpd from 2017 level, resulting in a balanced market.

“According to OPEC forecast, world oil demand growth is estimated at 1.51 million bpd in 2018, mainly driven by healthy global economic growth which supports demand of industrial and construction fuels in both Organisation for Economic Cooperation and Development (OECD) and non-OECD area.

“The expansion in the transportation sector is expected to provide the bulk of oil demand growth,” it said.

According to the latest OPEC production cut agreement, Nigeria and Libya agreed to cap their combined output at 2017 levels below 2.8 million bpd, which would provide a strong support to the oil price.

“Note that combined oil production rate of Nigeria and Libya from January to October this year ranged close to 2.52 million bpd, representing an increase of 57,000 bpd, or 29.5 per cent, over 2016 combined production rate of 1.95 million bpd,” said HLIB.

The investment bank maintained its neutral stance on oil and gas companies under its coverage as earnings recovery overall in 2018 was still not sufficient to justify a re-rating on the sector as a whole.

One of the few bright spots in the latest Petroliam Nasional Bhd’s activity outlook report was maintenance, construction and modification (MCM) activities were expected to remain stable over the next few years due to increasing number of projects and ageing facilities.

“This is positive for major MCM players like Dayang Enterprise Holdings Bhd, Petra Energy Bhd and Sapura Energy Bhd,” it said. —