Tight oil market likely to fuel volatility; Brent expected to average US$100 in 2022: Maybank

OIL prices will likely remain at volatile and high levels, as global demand rises while supply continues to be disrupted by rising geopolitical tensions and prolonged under-investment, Maybank Research said.

In a report on Monday (Mar 7), the brokerage raised its estimates for Brent crude to US$100 per barrel in 2022, from US$75 to US$80 per barrel previously.

It expects Brent crude will likely continue facing upward pressure, after it has averaged at around US$93 per barrel year to date after recent price surges.

With global economies progressively recovering post-pandemic, Maybank said consumption will likely surpass pre-Covid levels in the second half of 2022 as the tourism and aviation sector picks up.

However, the research team expects the market will remain under-supplied for a prolonged period of around 2 to 3 years.

Global capex for exploration and production have been declining amid long-term demand uncertainty, tighter access to financing and greater push for ESG (environmental, social, and governance) considerations, Maybank said.

Oil inventories of crude oil and petroleum products within the Organisation for Economic Co-operation and Development are also at "alarmingly low levels", while the Organization of the Petroleum Exporting Countries and its allies (Opec+) will likely continue to struggle to meet monthly production quotas as they recover from the pandemic.

As Russia accounts for 10 per cent of the global oil supply, a sanction as a result of the Ukraine conflict should also adversely impact the oil market.

Additionally, while a US-Iran nuclear agreement would likely ease the upside in the short-term by adding output, Maybank said this is not a long-term solution as Iran may still face difficulty in providing additional output due to the severe under investment from sanctions in the past.

As for companies it has a "buy" call on in South-east Asia, the research team recommended the following counters: Hibiscus Petroleum, Yinson Holdings, Dialog Group, Petronas Chemicals Group and Solarvest Holdings, all of which are listed in Malaysia.

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