DBS Group Research analysts Suvro Sarkar, Ho Pei Hwa, Duladeth Bik and William Simadiputra are estimating that prices for Brent crude oil will average between US$85 to US$90 ($112.48 to $119.10) per barrel in 2023.
This is lower than the average of US$99 per barrel in 2022, although still higher than the average prices seen between 2015 to 2021.
“Despite recession concerns, we do not expect oil prices to fall off the cliff, as the supply side continues to be tight, support from the release of strategic petroleum reserves (SPRs) tapers down, and the European Union (EU) ban on Russian oil and product imports comes into effect,” the analysts write in their Jan 31 report.
“China reopening trajectory will be the biggest positive going forward in 2023. Meanwhile, lower natural gas prices could help Europe dodge a recession and provide further support for oil prices,” they add.
Further to their report, the analysts remain positive on Chinese oil majors as value plays even though these companies mostly corrected by 10% to 20% from their recent highs on the back of profit taking and outflows amid recession fears.
“As China’s reopening gathers pace, we could continue to see some uplift from here following China’s reopening and a pick-up in broad investor sentiment for the Hong Kong/China market, though the upside could be more benign than in 2022,” the analysts write.
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“We maintain our ‘buy’ calls on China National Offshore Oil Corporation (CNOOC), PetroChina, and China Petroleum & Chem (Sinopec), which still offer 15%-25% upside to our revised target price and lucrative FY2023 dividend yield of 8%-11%,” they add.
The analysts have given CNOOC, PetroChina and Sinopec TPs of HK$13 ($2.19), RMB5 (97.6 cents) and RMB5.30 ($1.03) respectively.