Equity Analysis /
Australia

AU : Oil & Gas - Overall - Beyond the turn

    Max Vickerson
    Max Vickerson

    Research Analyst

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    Adrian Prendergast
    Adrian Prendergast

    Senior Analyst - Mining and Energy

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    CGS-CIMB
    14 January 2021
    Published byCGS-CIMB

    We gain further conviction in our view that both oil and LNG markets have moved off their lows, still presenting an opportune time to invest in the space. Consensus expects oil supply to track recovering demand in 2021, where we see an opportunity for some tightness adding further support from a slower response. LNG spot prices have transformed on seasonal tightness overwhelming weak market conditions, we expect this to continue to the next northern summer. Domgas prices are recovering, but still sit at a discount to LNG netback prices. We have further upgraded our Brent oil price forecasts for 2021, taking into account the quicker-than-expected recovery observed. While also moving our LNG spot assumptions towards the forward curve. Unfolding developments support our conviction call in oil/LNG, our top sector picks are STO, BPT, SXY and KAR, still believing an overweight position towards energy is applicable to most investor types at this point in the cycle.