MISC Bhd is expected to benefit from the increase in the US crude demand as importers source for alternative supplies over Russian sanctioned cargoes, Affin Hwang Capital said.
The firm said the event had helped to support petroleum tanker rates.
“This would benefit MISC which has 40 per cent of its Aframax fleet under spot hire.
“However, the overall petroleum segment recovery may be tepid as higher spot rates will be partially offset by the increase in bunker fuel costs, port charges and shipping insurance costs, and with its overall petroleum portfolio being weighted towards term charters at a 71:29 mix,” Affin Hwang said in a note today.
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Petroleum tanker freight rates experienced a knee-jerk reaction in February 2022 at the beginning of the Russia-Ukraine war, reflecting market concerns on potential supply disruptions.
Tanker rates have retraced from the highs in March 2022, but still increased over the past week as importing countries in Europe seek alternative crude supplies.
Affin Hwang said amid further sanctions expected to be imposed on Russian exports, the US had reached out to Iran and Venezuela to boost global crude oil supplies and was negotiating for a possible sanction lift on these two countries in an attempt to make up for the Russian supply void.
“Iran’s production is currently one million barrels per day below its pre-sanction level but there is further upside on its exports.
“This may help tanker rates to stay elevated in the medium term, if the sanctions are lifted.
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“Elsewhere, a ramp-up in Venezuela oil is looking farfetched as the country continues to suffer from low production given historical mismanagement of its reserves,” it added.
Affin Hwang has raised MISC’s 2022 earnings forecasts by four per cent after adjusting for higher tanker rates led by the global diversion in crude supplies flow.
It has maintained its “Hold” call on MISC, with a higher target price of RM7.25 from RM6.80 previously.
Source: The Straits Times