The Middle East crisis could cause oil prices to soar.Buy Energy Stocks – Analyst

KUALA LUMPUR (April 22): Investors should continue buying into the oil and gas (O&G) sector, analysts say, as continued uncertainty from tensions in the Middle East is expected to push up oil prices. List et al.

RHB Investment Bank said oil prices could reach US$140 (RM669.62) per barrel if the conflict between Israel and Iran intensifies, reminding us of the outbreak of conflict between Russia and Ukraine. However, according to research agency estimates, oil prices are likely to average $82 in 2023, compared to the current average of $88 this year.

“Depending on the size of the event, prices could remain elevated for a longer period of time,” the report said. Assuming there is no further escalation between the two countries, the disruption in the oil market is “quite manageable” at this stage, RHB noted.

Brent, the global benchmark for crude oil, was trading between $85 and $92 a barrel as Israel and Iran traded drone and missile strikes. The conflict comes on the heels of the conflict between Israel and Hamas in Palestine and attacks on Israel by Houthi militants that sparked the so-called Red Sea crisis.

Share prices of Malaysian O&G companies rose. The Bursa Malaysia Energy Index, which tracks 22 O&G companies, is up 19% so far this year. Dialog Group, the largest company by market capitalization, is up 15%, while Hibiscus Petroleum is up nearly 9% year-to-date.

Meanwhile, the United States has also reimposed sanctions on Venezuelan oil, but this measure is expected to have minimal impact on the oil market as the country’s crude oil production was only 800,000 barrels per day in the first quarter of 2024. RHB pointed out. .

Regarding its strategy, RHB emphasized that companies focused on exploration and production, such as Dialog and Hibiscus Petroleum, will benefit from higher oil prices. The research organization also continues to favor upstream services companies, which will benefit from strong activity and stable charter rates.

The 2024 oil price of US$84 per barrel will also support local upstream investment, but given the lack of investment in the early 2020s, Kenanga Investment Bank believes investors will be more interested in the midstream sector, especially tank terminals. He also warned that attention should be paid to

While the market is showing “signs of bottoming out,” a surge in low-carbon storage-related projects presents growth opportunities for tank terminal operators, Kenanga said, calling the sector “overweight.”

The global storage market is seeing a resurgence in utilization rates and storage day charges in 2023, with Dialog forecasting a daily storage charge of S$6.50 (RM22) per cubic meter, compared to a low of S$5.50 in 2022. The research company pointed out that this shows that the average price is .85).

Kenanga’s favorites in the sector are Dialog, Inson Holdings, Keyfield International and Icon Offshore Bhd.

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