It said the recent escalation in Middle East tensions spells two probable scenarios in the coming months.
“We think the base case scenario is for tensions to stay isolated within selected countries in the Middle East, suggesting that the collateral damage may be limited to the broader region and the Group of Seven (G7) members,” it said in a note today.
In this scenario, the research house discounts the possibility of a further escalation between Israel and Iran, with both sides taking a defensive (rather than offensive) stance in the current conflict.
“We view the second scenario – further escalation of current tensions – to be a tail-end risk at this point, defined as tensions spreading into the broader Middle East region, which may be further exacerbated should the G7 region use military intervention,” it said.
Overall, it has raised its Brent oil prices forecast for 2024-2025 to US$88 (RM420.99) per barrel and US$83 (RM397.07) per barrel, respectively, as the uncertainties arising from recent geopolitical conflicts could support prices in the near term.
It said prices could stay elevated for longer, depending on the magnitude of the event.
Meanwhile, Kenanga Investment Bank Bhd (Kenanga IB) also maintained its ‘overweight’ stance for the O&G sector.
It also maintained its Brent crude oil price assumption of US$84 (RM401.86) per barrel for the calendar year 2024 forecast (CY24F) and introduced the CY25F assumption of US$79 (RM377.93) per barrel, assuming the Organization of the Petroleum Exporting Countries and its allies (Opec+) discontinue their production cuts by end 2024.
“These oil price levels are supportive of upstream investment locally, especially considering the under-investment by producers in the early 2020s,” it said.
Overall, the research house is favouring offshore supply vessel owners due to the supply crunch on a surge in demand leading to strong charter rates; floating production storage and offloading (FPSO) players, given the current upcycle in the FPSO sector; and the storage segment that has shown signs of recovery.
RHB Research said its top picks include Dayang Enterprise Holdings Bhd with a target price (TP) of RM2.95 and Dialog Group Bhd with a TP of RM2.79.
Meanwhile, Kenanga IB said its top picks are Dialog with a TP of RM3.10, Yinson Holdings Bhd with a TP of RM3.47, and Keyfield Offshore Sdn Bhd with a TP of RM1.90.