Equity Analysis /

Thailand (Bualuang): Energy - 2Q22 playbook—upstream O&G to lead

  • S-T oil demand hiccup, broad improvement still expected for 2022

  • Supply tightness to push oil prices up in 2Q22

  • Demand hike to boost GRM YoY, higher cost to squeeze GRM QoQ

Suppata Srisuk
Suppata Srisuk

Equity Research Analyst

Bualuang Securities
25 March 2022

Despite the short-term demand hiccup, supply tightness will tend to boost crude prices further in 2Q22. GRM should also fatten YoY in 2Q22, buoyed by rising demand. However, higher crude costs may squeeze GRM QoQ. Improving demand will push coal prices up YoY, but the coal prices are likely to soften seasonally QoQ. Current valuations are still a bargain. Hence, our NEUTRAL rating for the sector stands. PTTEP and TOP are our preferred picks.

S-T oil demand hiccup, broad improvement still expected for 2022

The global crude demand looks set to expand further through 2022, boosted by global economic growth. That said, the recent oil price spike may derail the global oil demand recovery in the short-term. The Russia-Ukraine war is a key factor to watch. If the situation is short-lived, global oil demand should continue its expansive mode. On the flip side, if the war prolongs and undermines global economic growth, this may negatively impact the broad demand for oil. The new sub-variant of COVID-19 is another factor to watch, as it may dampen oil demand.