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PETALING JAYA: The stellar run of the Brent crude oil price this year has brought small-to-medium sized oil and gas (O&G) service providers back to life.
O&G service providers, which were a major laggard from late 2020, were among the most actively traded stocks yesterday as the international benchmark Brent crude oil went above US$96 (RM402.38) per barrel.
The Bursa Malaysia Energy Index surged 1.7% or 13.5 points to 802.34 points, as investors estimated that Brent crude oil could continue to rise on supply disruption due to a possible invasion of Ukraine by Russia.
RHB Research has raised its forecast on Brent crude oil to US$90 (RM377.45) and US$75 (RM314.54) for 2022 and 2023, respectively, from US$70-US$83 (RM293.57-RM348.09), to reflect the heightened geopolitical tensions between Russia and Ukraine, and the continuous shortfall in meeting the Organisation of the Petroleum Exporting Countries or Opec’s production quota.
“We expect oil prices to trend higher to an average of US$100 (RM419.38) per barrel in the second quarter of 2022, but still assume there will be no massive supply damage in the longer term.
“Oil prices could potentially hit US$110-US$120 (RM461.32-RM503.26) per barrel if the war materialises, and will stay higher for longer – depending on the magnitude of the event,” it said in a report yesterday.
It is worth noting that Russia is the second largest oil and dry natural gas producer in the world after the United States, with a production of 10 million barrels per day (mbpd) and it exports natural gas to Europe.
According to the US Energy Information Administration (EIA), crude oil and natural gas revenue accounted for about 43% on average of the government revenue between 2011 and 2020.
“Should there be an imposition of sanctions by the US on Russia, it could possibly trigger a retaliation from Russia via the restriction over the export of energy resources,” RHB said. The research house pointed out that if there was no war between Russia and Ukraine, price moderation could happen in the second half of this year.
“We still keep a relatively lower price forecast at US$80-US$88 (RM335.51-RM369.05) per barrel in the second half of 2022, on the back of higher supply pressure from Opec+,” RHB said.
It added that in a potentially stronger rebound of production in the US, as the country’s rig count is still on the rise, it could add risk to crude oil prices.
The EIA has revised its forecast on US oil production in 2022 and 2023 upwards to 12 mbpd and a record 12.6 mbpd, from 11.8 mbpd and 12.4 mbpd.
RHB said it is “overweight” on Malaysia and Thailand’s O&G sectors. It reckoned that the exploration and production, as well as petrochemical companies should continue to enjoy strong earnings.
Source : https://www.thestar.com.my/business/business-news/2022/02/15/oil-and-gas-stocks-roar-on-bursa-malaysia