Midstream Oil and Gas Players Set to Ride Firm Crude Flows
Midstream oil and gas players are set to ride firm crude trade flows and tight vessel supply, according to RHB Investment Bank (RHB IB). The analyst said that tanker rates were already strengthening before the recent conflict, supported by higher crude exports, longer-haul trade flows, and tight vessel supply. While geopolitical risk premiums may moderate, RHB IB expects tanker rates to remain above last year's levels.
The research house pointed out that liquefied natural gas (LNG) shipping markets have shown signs of recovery from trough levels, with improving charter rates supporting a more stable earnings outlook. MISC Bhd (KL:MISC), for instance, should continue to benefit from the favourable tanker environment, providing an earnings tailwind alongside its largely contracted LNG portfolio.
RHB IB kept its 'overweight' call on the oil and gas sector, favouring MISC for its defensive and diversified earnings base. The research house also highlighted Dialog Group Bhd (KL:DIALOG) as a top pick, citing its resilient recurring-income visibility from predominantly take-or-pay midstream operations.
RHB IB expects petrochemical prices to remain volatile in the near term, with the outlook hinging on supply recovery and geopolitical developments. For PETRONAS Chemicals Group Bhd (KL:PCHEM), weaker urea and ammonia prices will be partly offset by firmer methanol prices.