KUALA LUMPUR, Dec 28 — Global oil demand is expected to revert to pre-pandemic levels at 100 million barrels per day (bpd) in 2022, Kenanga Research said.
As a comparison, oil demand was at its lowest at about 80 million bpd in the middle of the pandemic in April 2020, it said in a Covid today.
“While renewed concerns over Covid-19 variants remain the largest uncertainty to the oil demand projection, our base case is that impact from the recent Omicron variant should be mild and short-lived.
“Nonetheless, we expect production growth from the Organisation of the Petroleum Exporting Countries+ Plus (Opec+) and US tight oil could mildly outpace slowing growth in oil consumption, with Opec+ seeking to gradually ease production cuts and reintroduce supplies into the market,” the research house said.
Kenanga Research said hence, it maintains its 2022 average Brent crude price assumption of US$65 per barrel.
“While possibilities of significant upsides to crude oil prices could be low, our view is that as long as oil prices can hold firmly above the US$60/barrel-mark, current projections of investments and activity levels should not be significantly derailed.
“That said, 2022 is expected to be a year of recovery in terms of activity levels and investment spending — both globally and locally,” it added.
It said global exploration and production spending could see a rise in 2022, given the levels of under-investments over the past one-two years, while Petronas is expected to spend RM40-RM45 billion per year for the next five years in capital expenditure — of which upstream should still remain as the largest area of investment.
“Sector valuation is also at a discount, and has yet to recover, despite the strength in oil prices in recent months.
“We maintain overweight on the sector, with top picks this quarter being more defensive such as Dialog Group Bhd and and MISC Bhd,” it said. — Bernama
