OPEC+ has just decided to reduce its collective output by 2 million barrels per day (bpd).

Following that, Goldman Sachs 
raised its 2022 price forecast for Brent crude from US$99 to US$104 per barrel. 

Goldman sees Brent trading at US$110 this quarter and US$115 per barrel in the first quarter of 2023.

Morgan Stanley also raised its price forecast for Brent crude, to US$100 for the first quarter of 2023.

According to Goldman’s latest forecast, the average for Brent next year could be $110 per barrel as a result of the cuts.

The unfortunate consequence of the reduction in oil supply is its impact on consumers struggling with inflation and power shortages.

On Friday (7 Oct), KGI Research put out the following note: 

Rex International Holding Ltd (REXI SP): largest oil output cut since 2020

  • RE-ITERATE Entry – 0.240 Target – 0.270 Stop Loss – 0.225
  • Rex International Holding Limited operates as an independent oil exploration and production company. It operates through Oil and Gas, and Non-Oil and Gas segments. The company offers Rex Virtual Drilling, a liquid hydrocarbon indicator, which uses seismic data to search for oil. The company is involved in the oil and gas exploration and production activities with a focus in Oman and Norway.

  • Oil rebounded back to a three-week high. Oil prices gained after OPEC+ agreed to cut output by 2mn barrels/day from November. Brent went up 2.03% to US$93.6/bbl, and WTI went up 1.97% to US$88.06/bbl.

  • Dollars pulled back and commodities rebounded. The US dollar index remains at below 112 after reaching a 20-year high of 115 last week. Commodities are inversely related to US dollars. The short-term correction of the dollar index provides relief rebound opportunities for global commodities.

  • Ukraine War. Following the invasion of Ukraine, some countries have made the decision to stop buying Russian oil, imposed sanctions on Russia and G7 is planning to place a price cap on Russian oil purchases. Thus causing the price of oil sold by Russia to be significantly cheaper than oil from other sources, attracting more oil purchases from Asian countries such as India and China.

  • Updated market consensus of the EPS growth in FY22/23 is -52.4%/368.4% YoY respectively, which translates to 9.0x/1.9x forward PE. Current PER is 4.6x. Bloomberg consensus average 12-month target price is S$0.47.

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