KUALA LUMPUR, Nov 6 — Hong Leong Investment Bank (HLIB) maintained its overweight rating on the oil and gas (O&G) sector and expects oil price to remain higher-for-longer at the range of US$80-US$90 per barrel in the medium term.
It said the expectation on the oil price would premise on continued production cuts from the Organisation of the Petroleum Exporting Countries (Opec) to pre-empt a potential lower demand arising from economic risk at least until mid-2024 and heightened geopolitical risk premium as the market factors in the potential escalation of Israel-Gaza conflict in the Middle East region.
Limited supply capacity growth would also influence the oil prices movement as the shale oil output growth would start slowing going forward and impending restocking activities of the US Strategic Petroleum Reserve (SPR), said HLIB.
“Our Brent crude oil forecast for 2023/2024/2025 is US$85/85/80 per barrel. Downside risks to our projections include reactivation of spare capacity from Opec in the near term, China’s slower-than-expected oil demand growth and de-escalation of geopolitical conflicts,” it said in a note today.
The investment bank said the US SPR is at its lowest level since 1983 at 351 million barrels as of September 2023.
“The US Department of Energy seeks to purchase 6 million barrels of crude oil for delivery to the SPR in December 2023 and January 2024 at US$79 per barrel or less. These replenishment activities are expected to limit some downside risk to oil prices going forward,” it added.
On the Israel-Hamas conflict, HLIB said it did not foresee immediate supply risk from the region. — Bernama
