RISING CRUDE OIL PRICES GIVE TRADING OPPORTUNITIES FOR O&G COMPANIES - AMINVESTMENT BANK

The current oil price environment provides a trading opportunity for oil and gas (O&G) companies which are exposed to the exploration and production subsegment as they will be able to command stronger selling prices, said AmInvestment Bank Bhd.

In a research note, AmInvestment Bank has maintained “overweight” on the O&G sector, said prices have begun testing the US$90 (US$1=RM4.72) per barrel (bbl) level, following heightened concerns over energy security.

Apart from that, the research firm said the global oil consumption has been stronger than expected, particularly in China as the country's crude oil imports rose by 5.1% year-to-year (y-o-y) during January and February with oil cargo arrivals totalling 10.7 million barrels per day (bpd).

It said the situation was in line with its expectations that the resumption of international air travel and increased activities by Chinese refiners would provide upside to the country's oil demand in the near term.

“We maintain our Brent crude oil price projection at US$85/bbl for now as global supply and demand levels have remained broadly within our expectations. 

"For reference, this is slightly lower than the US Energy Information Administration's (EIA) 2024 forecast which was recently raised to US$88 per barrel from US$83 per barrel in its January's short-term energy outlook on the back of OPEC+ production cuts, but is in line with leading consultant Rystad Energy's forecast of US$85 per barrel," it said.

AmInvestment Bank, however, expected Brent crude oil price to trade range-bound between US$70 and US$95 per barrel.

Meanwhile, the research house has chosen Hibiscus Petroleum (Buy, future value or FV: RM3.44) which is fully exposed to the subsegment through its direct interest in four production assets in both Malaysia and the North Sea, UK. 

The group expects total sales volume to be in line with its prior guidance at 7.7 million barrels in FY2024.  

"We also expect to see Dialog Group Bhd (Buy, FV: RM2.91) as a potential beneficiary due to its exposure through assets L53/48 field in Thailand and the D35, D21 and J4 production sharing contracts in Malaysia," it said.