KUALA LUMPUR: Hong Leong Investment Bank (HLIB) Research believes that the elevated oil price environment will persist in the second half of 2022 (2H2022) as both oil demand and supply will increase over the next few months.
The bank-backed research firm said the demand would be driven by the easing of restrictions in China, summer driving, and jet fuel recovery.
"The Organisation of the Petroleum Exporting Countries (OPEC) and the United States (US) have also decided to increase production and release their reserves to fend off an acute supply deficit.
"With that, we maintain our Brent crude oil price per barrel forecast of US$100-110 for 2022," it said.
HLIB Research also noted that Petroliam Nasional Bhd (Petronas) has announced that it will be increasing its capex in 2022 to RM60 billion.
The firm said this would augur well for the local oil and gas sector as most of the listed service providers in the OGSE space heavily rely on Petronas as a major client.
"However, we understand that there is no increase in dividend commitments for 2022 of RM25 billion despite expectations of improved profits amidst an elevated oil price environment.
"We maintain Overweight on the Oil & Gas (O&G) sector with Dagang Nexchange Bhd (DNeX), Bumi Armada Bhd and Dialog Group Bhd as our top picks," it added.