‘Oil to stabilise at about US$50 a barrel this year’

PETALING JAYA: PublicInvest Research believes pressures on oil prices will persist but eventually balance out at around US$50 (RM214.50) per barrel (bbl) this year.

In a note yesterday, the research house said it expected the levels should be enough for oil majors to restart their capital expenditure plans considering the lower cost of production and better efficiencies attained in recent times.

PublicInvest said it remains “overweight” on the oil and gas sector based on oil prices stabilising.

“Our estimates are premised on the average year-to-date oil price at US$52.3/bbl for Brent and its futures for 2H’17 at US$49.0/bbl to balance the year at our estimated US$50/bbl price for Brent in 2017,” its analyst Mabel Tan said.

She said the research house opined the industry is more focused on robust activity at stable oil prices, rather than very high oil prices at this juncture which is not sustainable. For 2018, she said, the research house estimated oil prices stabilising at US$55/bbl.

Meanwhile, she said the saga between Qatar and the Saudi-led Arab states continued, with Doha rejecting the full list of 13 demands, deeming the measures for restoring relations with Qatar as not viable.

Nevertheless, Qatari Finance Minister Ali Sharif al-Emadi stated that the world’s largest liquefied natural gas exporter has enough resources necessary to weather the sanctions.

Tan said the research house does not expect geopolitical tensions in this region to be resolved in the near term, which could potentially swing oil prices overnight.

In the meantime, she said that rising demand could be seen coming from Asia, as lower prices of oil would likely lead to higher crude purchases from this region, thereby minimising the fear of too much oncoming supply.