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Macquarie Group holds an “outperform” rating on Royal Dutch ShellandBG Group. Despite geopolitical uncertainty, Jason Gammel, head of European oil and gas research at Macquarie, said that these oil stocks are ripe for investment as winter approaches.
With tensions in Syria on the rise, the outlook for oil prices may look unstable. “We’re looking for about $105 through the end of the year and probably into next year,” Gammel said. “The oil market has essentially moved to the level of equilibrium right now.”
Beyond uncertainty in the Middle East, Gammel said the overarching concern in the sector is weak growth in China. He explained that Chinese demand for energy, the overall driver of the big bull market in oil prices, has significantly slowed over the past six months. “We need to see Chinese demand numbers come back into the market,” he said.
While a significant increase remains to be seen, Macquarie expects Chinese oil demand to improve later in 2012. If this is the case, select oil stocks may be in a position to pop.
Gammel called BG the “premier growth company” within Europe. Macquarie expects the stock to grow by 14 percent in 2013. It is anticipating an additional 8 percent growth per year through 2020. Macquarie has a $19.50 price target on the stock.
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