KUALA LUMPUR (May 18): Hong Leong IB (HLIB) Research has reiterated an "overweight" call on the oil and gas (O&G) sector, and said it expects Brent oil to average at US$85-90 for 2022.
In a technical tracker on Wednesday (May 18), the research house said that according to IEA, close to three million barrels per day of Russian production could be offline due to the international sanctions.
“In this regard, we note that the oil supply gap is widening and unlikely to be fulfilled by third party countries, given Russia supplies circa 10% of the world oil together with some world oil producers is near their maximum cap spare capacity.
“In the wake of the disruptions, we reckon the already multi-year low global oil inventories is set to prolong, exerting further upward pressure on global oil prices going forward,” it said.
HLIB said with elevated oil price, it is not far-fetched to imagine that the upstream O&G companies may be incentivised to expand their capacities to capitalise on the lucrative oil revenues.
“We reiterate an 'overweight' call in the O&G sector, with Brent oil expecting to average at US$85-90 for 2022,” it said.