KUALA LUMPUR (July 4): Hong Leong Investment Bank (HLIB) research is expecting global oil inventories to fall over the next few quarters following Opec+’s announcement in early June it would extend oil production cuts through 2024.

In its 2H2023 sector outlook released on Tuesday (July 4), the research house said this will put some upward pressure on crude oil prices in 2H2023-1H2024.

“With that, we maintain our Brent crude oil forecast of US$75-80/bbl for 2023.

Additionally, HLIB said Petronas has a domestic and total capex guidance of RM113 billion and RM300 billion for 2023-2027 — which translates into an average annual domestic spending of RM22.6 billion and total annual capex of RM60 billion.

“We maintain our Neutral stance on the Oil and Gas sector with Dagang NeXchange Bhd (Buy; TP: 80 sen) and Wah Seong Corp Bhd (Buy; TP: 96 sen) as our top picks,” it said.

Meanwhile, HLIB maintained a bearish outlook for the petrochemical sector this year, and said the sector is currently experiencing a down cycle as product spreads are seen to be coming off their respective peaks due to the following reasons: (i) additional new supply globally — which shows the following increase in total global capacity (Ethylene: 9.9%; HDPE: 13.2%; LDPE: 2.3%; LLDE: 10.0%; PP: 8.4%); (ii) weak demand resulting from a slowdown in the economy and higher interest rates impacting consumer spending.

“As such, we advise investors to avoid the downstream petrochemical names for the time being,” it said.