PETALING JAYA: RHB Research has maintained its outlook on the oil and gas sector (O&G) despite the Organization of the Petroleum Exporting Countries and its allies (Opec+) recently extending its crude oil production cut scheme to 2024.
RHB Research has maintained its “overweight” rating on the sector, believing that Opec+’s latest attempt to stabilise the market would only have a minimal impact on the O&G sector.
“Therefore, the net production cut impact year-on-year by Opec in 2024 is not significant, and we believe the market may not be overly excited over this,” said RHB analysts Sean Lim and Kasamapon Hamnilrat.
RHB Research has also chosen to keep its oil price projections unchanged for 2023 at US$85 (RM380.55) per barrel, as well as for 2024 and 2025 at US$80 (RM358.16) per barrel.
“While Brent (crude oil) prices have been averaging below our projected US$85 per barrel in Q2 2023, which could provide some downside risk to our full-year projection, we are still expecting the oil market to improve in H2 2023,” it said.
On March 31, Kenanga Investment Bank Bhd had maintained its “neutral” call on the O&G sector, projecting that oil prices are likely to be capped over the immediate term with the return of Russian oil to the system.
“Note that Russia is the third largest oil producer in the world, only behind the US and Saudi Arabia, contributing to about 10% of global production.
“Hence, a resurgence of Russian oil back into the circulation of global markets will have a significant impact on the global supply-demand balance,” noted Kenanga research analyst Steven Chan.
Kenanga, too, maintained its projection of the average Brent crude oil price for 2023 at US$80 per barrel.
Public Investment Bank Bhd, in a note dated May 31, said it felt optimistic that the O&G sector will remain stable despite the recent moderation in prices.
“Based on our checks, oil producers may review the economics of respective capex (capital expenditure) plans if the Brent crude oil price drops steadily below US$60 (RM268.62) per barrel.
“However, we believe this situation is unlikely in the near to medium term given the recent voluntary cut from Opec+ members to provide psychological support for oil prices at the US$70 (RM313.39) per barrel level,” said the investment bank.
Yesterday, Opec+ member Saudi Arabia announced it will be cutting its production of crude oil prices by a million barrels per day in order to boost the commodity’s prices.
Other members of the organisation also agreed to extend their oil production cuts they announced in April through the end of 2024.
Opec+ countries produce about 40% of the world’s crude oil.