Challenging yet intact outlook for O&G industry

by BERNAMA / pic by AFP

WHILE COVID-19 has caused the oil and gas (O&G) sector to face a sharp downturn, the outlook overview for the industry remains intact.

AmBank, in its equity note today, said the pandemic will have a net negative impact on global oil demand until 2025, with an estimated 0.9 million barrels per day below pre-COVID-19 levels.

“This is after falling 23 million barrels in April and an estimated seven million barrels in December 2020,” it said.

It added that based on a research conducted by Rystad Energy’s Deep Dive Oil Market, an independent energy research and business intelligence company; the next COVID-19 wave scenario could cut three million barrels per day production towards the end of the year.

“This will bring to only 3.5 million barrels per day in December 2021, eroded by demand reduction for jet fuel, gasoline, diesel and other fuels,” it said.

Rystad has also envisioned that the oil price recovering to a base-case scenario of US$75 per barrel in late 2022.

“A more volatile upcycle could mean over US$90 per barrel prices by mid-2022, followed by a more drastic collapse to US$30 per barrel in 2024 from potential over investments,” it said.

However, it said with the ongoing volatility of crude oil prices, the investment body believes that the down cycle has reached a bottom.

As at 10.25 am, benchmark Brent Crude stood at US$41.49 per barrel.

“Dialog Group, Serba Dinamik Holdings and Petronas Chemicals Group have reached the bottom low while Petronas Gas has shown optimal capital structure strategy and resilient earnings base translates to highly compelling dividend yields,” it said.

Petronas Gas and Petronas Chemical are the main companies under the Petroliam Nasional Bhd (Petronas) umbrella.

As at 10.22am, Petronas Gas up eight sen to RM16.46, Petronas Chemical down four sen to RM5.96, Dialog and Serba Dinamik were flat at RM3.80 and RM1.62, respectively.