KUCHING: Analysts projects 2016 oil price to average around the ‘best case’ of US$40 to US$45 per barrel for WTI & Brent from ‘base case’ of US$30 to US$35 per barrel, based on econometric models.
The research arm of AmInvestment Bank Bhd (AmInvestment Research) noted that, “Our ‘base case’ average oil price for 2017 is US$45 to US$50 per barrel and ‘best case’ at US$50 to US$55 per barrel.”
Supply disruptions from capex reduction led to output decreasing by around 3.75mbpd to 3.80mbpd and stopped the 77 per cent drop in oil prices between 2014 and 2016. Besides, speculators are taking a more bullish bet on the oil price.
“But we expect upside to be limited due to potential rate hike by the US Fed which translates into stronger US dollar and higher production going forward, spurred by an improved price environment.”
To date, the order inflows to Malaysian oil & gas players have risen to RM1.9 billion, largely from rig charter extensions and new maintenance orders for SapuraKencana Petroleum.
The research team expect these order flows to improve as activities remain unabated on the Refinery and Petrochemical Integrated Development (RAPID) and ongoing upstream field development works.
While Petronas’ recent results showed that 1Q16 capital expenditure dropped RM11.3 billion due to cutbacks in upstream developments, these expenses went into the RAPID and overseas upstream projects in Canada and Azerbaijan.
Crude oil prices have since rebounded to US$48 per barrel on concerns of supply disruptions arising from Canadian wild fires.
However, potential hedging activities and the recent weekly rise in US inventories by 1.3 million barrels could indicate that the current trajectory may not be sustainable.
“As Petronas maintains its crude oil price outlook at US$30 per barrel for 2016 and US$40 per barrel for 2017, we do not expect any significant change in the group’s strategic direction towards rationalisation of upstream exploration and development expenditures.
“While upstream developments face significant cut-backs, we expect downstream activities, which benefit from low crude oil prices, to be less affected. Hence, we expect other projects, which are already at the development stage to proceed without delays.”