Oil & Gas Producers (Energy)
Oil & Gas Sector - Retracing oil prices
Fri, 05-Jan-2024 10:26 am
by Lee Cherng Wee • Apex Research

Review

Oil price rallied in 3Q23 from below USD70/bbl in June 2023 to over USD90/bbl in September before correcting downwards in 4Q23. In line with lower oil prices in 4Q23, the Bursa Malaysia Energy Index came of its peak of 900 pts in September. We gather that the index continues to demonstrate strong correlation with oil price.

Outlook

Oil price is expected to remain elevated over the near term despite softer demand due to slower global economic growth as OPEC+ remains defensive with its production cuts to limit supply and support prices. Other potential catalysts include China’s reopening which could gain momentum and potentially boost demand for oil, recovery in air travel increases jet fuel demand, and geopolitical factors that affects supply. Going forward, OPEC forecasted supply deficit to continue next year while IEA and US IEA expect slight surplus in 2024. We expect oil prices to average around US$80/barrel in 2024.

Valuation & Recommendation

Elevated oil prices are expected to benefit players such as Hibiscus Petroleum Bhd (NR, FV: RM1.39), Bumi Armada Bhd (HOLD, FV: RM0.61), Dayang Enterprise Holdings Bhd (NR, FV: RM1.39), Uzma Bhd (NR, FV: RM1.06) and Yinson Holdings Bhd (NR, FV: RM3.67).

Recommendation: Overweight
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Market Mover
Settlement Rates
Currency Buy Rates (RM) Sell Rates (RM)
USD 4.452920 4.487673
EUR 4.698373 4.707035
CNY 0.612094 0.612693
HKD 0.572113 0.576600
SGD 3.311112 3.337265