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Oil prices likely to stay elevated on Russia-Ukraine conflict, says research house
The research house said the situation is compounded by the low oil inventories, coupled with the aggressive stock draws amidst healthy demand and Organisation of the Petroleum Exporting Countries’ (Opec) reluctance in reintroducing additional supply into the market. — Picture by Miera Zulyana
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KUALA LUMPUR, April 4 — With the invasion of Ukraine by Russia causing significant uncertainties over potential oil supply disruptions, Kenanga Investment Bank Bhd expects oil prices to stay elevated for the time being.
The research house said the situation is compounded by the low oil inventories, coupled with the aggressive stock draws amidst healthy demand and Organisation of the Petroleum Exporting Countries’ (Opec) reluctance in reintroducing additional supply into the market.
“Overall, we are maintaining our 2022-2023 average Brent crude oil price assumption of US$90 per barrel, which is also broadly in line with the market’s expectations.
“Meanwhile, recovery trajectory of activity levels is also expected to sustain,” it said in a note today.
The research house also anticipates Petroliam Nasional Bhd (Petronas) to normalise its capital expenditure (capex) spending to RM40-50 billion per annum this year, with local upstream still expected to be the largest area of investment although with increased emphasis on renewable energy.
Globally, the research house is also expecting global exploration and production (E&P) capex spending to continue its recovery.
“We feel that the sector has still yet to fully price in positives, with rebound rallies still rather short-lived,” it said.
As such, Kenanga Research is maintaining its ‘overweight’ call on the sector, with Petronas Chemicals Group Bhd (target price (TP) of RM11.00 per share) and Hibiscus Petroleum Bhd highlighted as oil price beneficiary plays, while Dayang Enterprise Holdings Bhd (TP RM1.00 per unit) and Uzma Bhd (TP RM0.68 per unit) as recovery trading plays. — Bernama