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PETALING JAYA: The oil and gas (O&G) industry, which has been stagnant due to oversupply and falling energy prices caused by the Covid-19 pandemic, is likely to end the year on a high note .
There is a turnaround taking place that saw Brent crude hit its highest level since March at $ 48.80 a barrel in hopes of an effective vaccine that could pave the way for the energy and travel industries to recover.
Oil-related stocks topped Bursa Malaysia’s top winners yesterday following a renewed outlook for the industry.
Hibiscus Petroleum Bhd
closed 5.1% higher at 62 sen, Sapura Energy jumped 8.7% to 12 sen, Petra Energy Bhd increased 10.75% to RM1.03 and Serba Dinamik Holdings Bhd it was up 1.76% at RM 1.73.
The breakthrough in the search for Covid-19 vaccines has changed sentiment around the O&G sector.
Hibiscus Chairman Zainul Rahim Mohd Zain expected prices to stabilize in the second half of 2021, based on the number of Covid-19 cases and the decisions of the OPEC + group.
Analysts and industry observers project higher crude oil prices in 2021, albeit below $ 60 a barrel due to the global economic recovery and growing demand.
RHB Research has forecast that oil prices will rebound to around $ 51 a barrel next year.
Meanwhile, Maybank IB Research said the price of Brent crude could hit $ 50 a barrel if it breaks a resistance at $ 46.50.
“Our next targets are US $ 52 and US $ 60 per barrel. On the other hand, the support is at US $ 41.20 and US $ 39.30 per barrel, ”he said yesterday in a report.
“The rise in the price of oil is going to arouse greater interest in the names of the national energy,” he added.
A local O&G analyst noted that oil producers like Hibiscus would benefit from the improvement in oil prices, while service providers would have to wait for big oil companies to announce more contracts.
“Higher oil prices would eventually help improve Petronas’ cash flow and therefore prompt it to spend more,” the analyst told StarBiz.
He calculated that oil prices would rebound next year, but it would be choppy due to oversupply and the growing number of Covid-19 infections.
Many big oil companies have been hit hard by the collapse in oil prices this year, forcing them to cut their capital expenditures.
Hibiscus Chairman Zainul Rahim Mohd Zain expected prices to stabilize in the second half of 2021, based on the number of Covid-19 cases and the decisions of the OPEC + group.
“Assuming that the pandemic stabilizes and there is a vaccine to improve economic growth prospects, we expect the price of oil to rise in the second half of next year. We expect a more stable oil price in the second half of 2021 and the oil price should strengthen from 2022, ”Zainul Rahim said during a virtual press conference on Monday.
As global demand for oil increases, inventory reductions in 2021 will cause some upward pressure on oil prices, with Brent expected to average $ 47 a barrel next year, according to the Energy Information Administration of USA
In April, Brent fell to US $ 14 a barrel, the lowest level since 1999. Futures also reversed to a record negative US $ 38 a barrel due to lack of storage capacity.
Even before the pandemic, the sector had faced an oversupply situation that hit many O&G stocks.
> See also page 8
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