德银-亚太地区-石油与天然气行业-油价由40美元每桶上涨到60美元每桶-20180117-45页_2mb

Document Summary: Oil Price Deck Upgrade and Energy Outlook for 2018

Core Content

Deutsche Bank's global commodities team has upgraded its oil price forecasts for 2018 and beyond, reflecting a more optimistic supply-demand outlook. The new forecast for Brent crude is USD62/bbl in 2018 and USD65/bbl in the long-term, up from the previous estimates of USD54.5/bbl in 2018 and USD60/bbl in 2021+. The team also raised WTI forecasts to USD56/bbl in 2018 and USD57/bbl in the long-term, from USD51/bbl and USD53/bbl, respectively.

Main Points

• Oil Price Outlook:

  • Brent prices are expected to remain above USD60/bbl, with a slight deficit in 2018/19.
  • Backwardation in the oil curve is expected to persist, contributing to positive roll returns.
  • Prices may have risen too quickly, but spot losses are expected to be modest.
  • The team cautions that Brent prices dipping below USD60/bbl is less likely, signaling a shift from the "lower for longer era" to a new USD60/bbl benchmark.
  • However, USD62/bbl is still below the current spot price of USD70/bbl, with concerns about US tight oil growth potentially overshooting expectations.

• Earnings and Price Targets:

  • FY18 earnings for CNOOC, SNP, PTR, and COSL have been raised by 40%–57%.
  • PTR is the most sensitive to oil price changes, with a USD1/bbl impact on FY18 earnings being 5.3%.
  • CNOOC has the highest target price uplift at +14.6%, due to its upstream exposure.
  • COSL is expected to benefit from increased capex spending by CNOOC, with a potential 30%+ increase in capex.

• Market Insights from DB Access China Conference:

  • Oil and gas companies highlighted a 10–30% increase in capex spending for 2018.
  • COSL's drilling fleet utilization is expected to rise by 10%.
  • Cost inflation is likely to be under control, with lower DD&A costs due to 2017 impairments.
  • Citygate gas prices are unlikely to rise, increasing import losses for PTR and SNP.
  • Pipeline spin-off remains uncertain, and refining margins may improve due to stricter tax enforcement.

• Investment Themes for APAC Energy in 2018:

  • Increased cash returns to investors, surpassing levels seen in 2013.
  • Upside risks to oil prices, especially for CNOOC, COSL, and Oil Search.
  • Capex rebound for oil field services.
  • Regional refiners (like RIL and IRPC) are expected to outperform Chinese refiners.
  • Structural gas shortage in China may lead to an LNG seller's market.
  • Preference for non-PE (non-petrochemical) companies like LG Chem and Kumho.
  • Sinopec's marketing IPO is expected to resume.

Key Information

• Oil Price Forecasts:

  • Brent: USD62/bbl in 2018, USD65/bbl in 2021+.
  • WTI: USD56/bbl in 2018, USD57/bbl in 2021+.
  • The oil price has moved above the previous "lower for longer" range, indicating a new equilibrium.

• Earnings Sensitivity:

  • PTR is the most sensitive to oil price changes, with a 5.3% impact per USD1/bbl.
  • CNOOC and SNP are less sensitive, with impacts of 4.0% and 1.5% respectively.

• Company Target Price Adjustments:

  • CNOOC: HKD12.54 (+14.6%).
  • PTR: HKD5.90.
  • SNP: HKD6.52 (+8.8%).
  • COSL: HKD9.68 (+20.0%).

• Supply and Demand Dynamics:

  • US tight oil growth is expected to increase, with a potential 24% rise in output.
  • The completion bottleneck has been overcome, and new frac capacity will aid in productivity.
  • OPEC is expected to begin discussions on unwinding supply discipline, leading to a reduction in surplus.
  • OECD inventory levels are expected to normalize, bringing inventory days back to 61 by 2018.

• USD Weakness and Oil Prices:

  • A weaker USD is associated with higher oil prices, with a multiplier effect of 3x to 6x.
  • However, the sensitivity is exaggerated as the USD is not the only factor influencing prices.

• Investment Recommendations:

  • Top picks include COSL (Buy), CNOOC (Buy), and Sinopec (Buy).
  • PetroChina (Hold) is also noted in the report.

Key Charts and Figures

• Figure 1: Shows the shift in DB's Brent price forecast from USD54.5/bbl to USD62/bbl in 2018.
• Figure 2: Compares DB's Brent expectations with the forward curve, indicating a stronger medium-term outlook.
• Figure 3-4: Reflect changes in FCF and dividend yields at DB's new Brent price.
• Figure 5: Illustrates the sensitivity of earnings to Brent price changes.
• Figure 6: Shows the implied long-term oil price from current share prices.
• Figure 7: DB Estimate Revision Summary Table showing updated price forecasts and earnings.
• Figure 8-12: Highlight historical and current price trends, USD depreciation, and PMI data.
• Figure 13-20: Supply-demand balance, rig productivity, and response functions to WTI prices.

Conclusion

The upgrade in the oil price deck signals a shift in the market's perception of oil prices, with a new equilibrium at USD60/bbl. Deutsche Bank's analysis indicates that while prices have risen, the fundamentals of supply and demand are improving, with a focus on US tight oil growth and OPEC's supply discipline. The team remains cautious about potential downside risks, especially from increased US supply and possible oversupply from non-OPEC sources. Despite these risks, the outlook for 2018 remains positive, with increased capex, improved earnings, and favorable dividend yields for key players in the energy sector.