Upstream Sector Stays Resilient Amid Falling Oil Prices and Global Demand Uncertainty in 3QCY24
The global oil and gas industry faced heightened uncertainty in Q3 2024 as volatile crude oil prices, fluctuating demand, and geopolitical tensions shaped market dynamics. Despite a temporary dip in oil prices, upstream operations showed resilience, maintaining steady investment and production levels.
Analysts predict continued challenges, particularly as OPEC+ output cuts and weaker-than-expected demand growth in key markets weigh on the sector. However, technological advancements and a focus on cost efficiency are helping mitigate some of the impact. This analysis delves into the key trends and drivers shaping the oil and gas sector’s performance in the third quarter of 2024.
1. Brent Crude & Natural Gas Prices Decline:
• The average Brent crude price in 3QCY24 dropped by -8% YoY due to lower global demand and increased non-OPEC production, amid geopolitical and economic uncertainties.
• Henry Hub natural gas prices fell -14% YoY but saw a +16% rebound in September CY24, driven by warmer weather and oversupply conditions.
2. Upstream Sector Resilience:
• Despite weaker crude prices, upstream activity remains robust, bolstered by continued investments in high-return projects.
• Malaysia’s oil production remained stable at around 2mbpd, while new discoveries in Sarawak boost local activity. PETRONAS plays a pivotal role with increased exploration under its production-sharing contracts.
3. Midstream and LNG Demand:
• LNG demand rose, supported by expanding infrastructure projects, including gas pipelines in Sarawak and a floating LNG facility in Sabah.
• The tanker market experienced mixed results, with long-term charter rates remaining stable, indicating a strong long-term outlook for oil transportation.
4. Downstream Recovery:
• Downstream demand is recovering, especially in petrochemicals, driven by higher average selling prices (ASP) and increased fertilizer demand.
• Domestic fuel demand is expected to increase, supported by seasonal factors and the end-of-year travel surge.
5. Renewables & Clean Energy Growth:
• Renewables and carbon capture and storage (CCS) projects are gaining traction, particularly in hydrogen and waste-to-energy technologies. PETRONAS and Sarawak lead CCS studies in Malaysia.
• The sector continues to align with global carbon neutrality targets by 2050, with ongoing investment in clean energy technologies.
6. Outlook:
• Brent Crude: Expected to range between USD71-81pb in October 2024.
• Natural Gas: Forecasted to rise to USD2.40-3.00pMMBtu in the coming months.
• Sector Performance: The upstream sector remains resilient, supported by contractual work. Midstream tankers are poised for growth, while downstream faces cautious optimism in petrochemical demand recovery.
Top Picks:
• Petronas Gas Bhd: Maintained as a “BUY” with a target price of RM19.23 due to its strong financials and potential in the LNG and hydrogen markets.
• Deleum Bhd: Also recommended as a “BUY” due to its strong position in upstream services and equipment.
Source: MIDF
Read More Business News
Table of Contents
Read More News on Business News Malaysia
Follow us on:
Read More News #latestmalaysia
Read More News on Business News Malaysia