OSK 'overweight' on oil&gas sector

Since oil demand from emerging economies, including China and India, are expected to grow, Malaysia's future oil and gas
trading hub in Johor will enjoy good demand as the country was situated along the trade route between the East and the West.

OSK Research said emerging economies in most parts of the world, except for United States, Europe and Japan, were thirsty for oil as demand was expected to grow by about six per cent, annually, compared with only two per cent in advanced economies.

"We believe Malaysia will, in the future, enjoy good demand for its services in Pengerang, Johor, which will be developed as the region's oil and gas trading hub," OSK said in a review of the just-concluded Asia Oil & Gas Conference held in Kuala Lumpur.

It said oil prices were likely to hover around US$100 per barrel following supply fears due to the unrest in the Middle East and the fact that oil was still being used as a hedging instrument against the weakening dollar.


"However, if oil price surpass US$100 per barrel and move above US$125 per barrel, economic growth in the region could potentially slow as each country would need to raise interest rates to battle rising inflation," it added.

While saying that 2011 would be a better year for the oil and gas industry, the company expected a ramp-up in capital expenditure (capex) spending in the coming months, noting that Petronas had planned a capex of US$300 billion. It maintained an "overweight" on the sector. -- Bernama