PETALING JAYA: The damage to key energy infrastructure in the Middle East from the ongoing conflict there and the closure of the Strait of Hormuz to vessels will support current higher prices for crude oil and gas, MBSB Research says.
The research house maintained its current crude oil price assumption of US$90 to US$100 per barrel and made a “neutral” call on the oil and gas sector with the price supported by a risk premium.
Prices for liquefied natural gas (LNG) have moved upward, hovering around US$16 to US$19 per metric million British thermal units, since the war broke out at the end of February.
“The destruction of several oil and gas facilities across parts of the Middle East has introduced additional uncertainty into global supply.
“Some affected assets may require an extended period to return to full operational capacity, reinforcing the persistence of a geopolitical risk premium in prices,” MBSB Research noted in its latest sector report.
Not only have prices of crude oil and LNG risen, tanker rates have also shot up due to capacity cuts and higher charter and insurance rates.
MBSB Research opined that higher energy prices would incentivise major oil producers to accelerate investment and development activities in order to compensate for the shortfall created by the disruption.
“Against this backdrop, we are of the view that upstream-support players would benefit from a potential pickup in industry activity should oil prices remain elevated,” it said.
Its preferred exposure to sector stocks within this environment is to companies such as Malaysia Marine and Heavy Engineering Holdings Bhd with a target price (TP) of 55 sen a share, Deleum Bhd with a TP of RM1.92 a share, and Bumi Armada Bhd with a TP of 54 sen per share.