RHB Research expects geopolitical developments to keep oil prices high

The research firm said the recent escalation of geopolitical tensions should support oil prices in the near term.

KUALA LUMPUR (Feb 15): RHB Research has maintained its overweight calls on the regional oil and gas (O&G) sector and maintained its 2024, 2025 and 2026 Brent crude oil price forecasts at US$85, US$80, and US$80 per barrel.

In a research note today, the research firm said the recent escalation of geopolitical tensions should support oil prices in the near term, but this premium may likely normalise more in the second half of 2024, assuming that the said tensions are not ramped up further.

RHB said its top picks are Yinson Holdings and Dayang Enterprise Holdings in Malaysia, PTT Exploration and Production based in Thailand and AKR Corporindo from Indonesia.

The research house said the disruptions due to the Red Sea crisis are affecting trade flows, leading to higher freight and insurance costs as well as longer shipping routes.

“Europe is also importing more crude oil products from the US and West Africa, as trade flows from Asia and the Middle East to Europe are being disrupted.

“In the near term, we may see the prices of certain products surging. Over the longer term, we may continue to see Asia’s top oil importers diversifying import sources to ensure that the supply of feedstocks is uninterrupted,” it added.

US crude oil production surged to a new high of 13.3 million barrels per day (mbpd) in November 2023.

RHB Research said the Energy Information Administration (EIA) expects production to average at 12.9 mbpd (+nine per cent year-on-year (YoY) or +one mbpd) in 2023 and at 13.1 mbpd (+one per cent YoY or +0.2mbpd) in 2024.

“This assumes a slight moderation from November 2023’s data, before production levels surge to a new record high in February 2025.

“Major US shale producers are likely to prioritise capital discipline to reward shareholders this year versus aggressively ramping up production.

“Downside risks to our outlook include weaker oil prices and demand, as well as a decrease in spending by clients,” it said. — Bernama

Facebook Messenger Twitter WhatsApp Email Print