Fragile Recovery: Not Out of the Red Yet
Key Takeaways:
▪️World oil prices have been showing enhancement, with Brent/WTI growing at +9.7%/+12.4% YTD (up to May 17th), however prices changes are still heavily influenced by the geopolitical friction happening in the Middle East.
▪️With OPEC’s output cut policy expiring in 1H24, global oil demand has not surpassed the supply just yet until Apr-2024 (even is estimated to intersect, should OPEC carry the policy throughout 2H24).
▪️The natural gas market is not over the hump, with -2.1% YTD price decline (up to May 17th) and low number of demand due to milder weather patterns and expansion of renewable alternatives.
▪️The ongoing conflict at the Red Sea prompts potential high risks of supply chain disruptions.
▪️We maintain a NEUTRAL rating for Oil and Gas sector. We continue to like AKRA and MEDC each with TP of IDR2,000 and IDR1,950, implying FY24E EV/EBITDA of 9.6x and 2.2x, respectively.
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