Global oil demand will strengthen further through 4Q21, while incremental supply upticks will be limited. Hence, crude prices and GRM should rise QoQ. Also, coal prices look set to sustain strong in 4Q21. The improving market outlook and attractive valuations should trigger share price rallies. However, the COVID-19 resurgence may stall demand recovery. Hence, our NEUTRAL sector call stands. PTTEP and TOP are our preferred picks.
Growing demand & limited supply to uphold oil prices in 4Q21
The easing of lockdowns across many jurisdictions will boost crude demand further through 4Q21, led by the US and Europe. Asia will follow suit once the COVID-19 resurgence eases. On the supply side, the gradual output increase by OPEC+allies will limit crude supply. Constrained oil supply increase amid growing demand will tend to push crude prices up further in 4Q21. Nevertheless, potential for higher production in the US and greater exports from Iran may limit the scale of the price rebound.