PETALING JAYA: AmInvestment Bank, which attended Norway-based independent energy research and business intelligence company Rystad Energy’s Deep Dive Oil Markets webinar, cited Rystad as saying that the coronavirus pandemic will have a net negative impact on global oil demand until 2025, with an estimated 900,000 barrels a day below pre-Covid-19 levels, after falling 23 million barrels in April this year and an estimated 7 million barrels in December 2020.
Rystad warned that a second wave scenario could cut 3 million barrels a day in production towards the end of the year and 3.5 million barrels a day in December 2021, eroded by demand reduction for jet fuel, petrol, diesel and other fuels.
Rystad envisioned oil prices recovering to a base-case scenario of US$75 a barrel in late 2022 from the curtailment of global oil production as demand gradually improves, which could set the next down cycle in 2023–2024. However, a more volatile upcycle could mean over-US$90 a barrel prices by mid-2022, followed by a more drastic collapse to US$30 a barrel in 2024 from potential overinvestments.
Rystad reiterated that the Covid-19 pandemic will continue exerting the single largest and long-term impact on global oil market as the transportation and petrochemical sectors account for 60% of global demand.
Despite the volatility, AmInvestment Bank Research said it believes that the down cycle has reached a bottom with the worst experienced in April this year when Brent spot prices fell to a low of US$14 a barrel while futures inverted to an abnormal negative price due to lack of storage capacity.
The research house maintained its ‘overweight’ call on the oil and gas sector with six ‘buy’ calls versus only two ‘sells’ and one ‘hold’ recommendation.
“We like Yinson Holdings Bhd as its earnings growth momentum from the maiden contributions of floating, production, storage and offloading vessels Helang, off Sarawak, Abigail-Joseph in Nigeria and Anna Nery in Brazil could be further propelled by another substantive Petrobras project, the Parque das Beleias.
“We also continue to have buy calls for Dialog Group Bhd and Serba Dinamik Holdings Bhd due to their resilient non-cyclical tank terminal and maintenance-based operations. We recommend Petronas Gas Bhd, as the group’s optimal capital structure strategy and resilient earnings base translates to highly compelling dividend yields,“ it said in a report yesterday.
Year to date, it said, Brent crude oil prices have averaged US$42 a barrel with the current spot price at US$41/barrel. This is supported by US crude oil inventories declining by 9% to 496 million barrels currently from the all-time high of 541 million barrels in June.
“Hence, we maintain our crude oil price forecast at US$40–US$45 a barrel for 2020, in line with Petronas’ near-term view, and US$45–US$50 a barrel for 2021.”
Source: The Sun Daily
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