KUALA LUMPUR, April 22 — RHB Research has maintained its ‘overweight’ stance on the oil and gas (O&G) sector as the research house foresees the geopolitical uncertainties to stay.
It said the recent escalation in Middle East tensions spells two probable scenarios in the coming months.
“We think the base case scenario is for tensions to stay isolated within selected countries in the Middle East, suggesting that the collateral damage may be limited to the broader region and the Group of Seven (G7) members,” it said in a note today.
In this scenario, the research house discounts the possibility of a further escalation between Israel and Iran, with both sides taking a defensive (rather than offensive) stance in the current conflict.
“We view the second scenario — further escalation of current tensions — to be a tail-end risk at this point, defined as tensions spreading into the broader Middle East region, which may be further exacerbated should the G7 region use military intervention,” it said.
Overall, it has raised its Brent oil prices forecast for 2024-2025 to US$88 per barrel and US$83 per barrel, respectively, as the uncertainties arising from recent geopolitical conflicts could support prices in the near term.
It said prices could stay elevated for longer, depending on the magnitude of the event.
Meanwhile, Kenanga Investment Bank Bhd (Kenanga IB) also maintained its ‘overweight’ stance for the O&G sector.
It has also maintained its Brent crude oil price assumption of US$84 per barrel for calendar year 2024 forecast (CY24F) and introduced CY25F assumption of US$79 per barrel, assuming the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) discontinues its production cuts by end 2024.
“These oil price levels are supportive of upstream investment locally, especially considering the under-investment by producers in the early 2020s,” it said.
Overall, the research house is favouring offshore supply vessel owners due to supply crunch on a surge in demand leading to strong charter rates; floating production storage and offloading players, given the current upcycle in the FPSO sector; and the storage segment that has shown recovery signs.
RHB Research’s top picks are Dayang Enterprise Holdings Bhd (target price (TP): RM2.95) and Dialog Group Bhd (TP: RM2.79) while Kenanga IB’s top picks are Dialog (TP RM3.10), Yinson Holdings Bhd (TP: RM3.47) and Keyfield Offshore Sdn Bhd (TP: RM1.90). — Bernama
