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Goldman Sachs: Oil Price Surge to Boost CNOOC, PetroChina Stocks

Goldman Sachs predicts that oil price surges from Middle East tensions will boost CNOOC and PetroChina's free cash flow by over 10%, even if Brent crude is $80-$90, and rates both stocks as buys. The firm negatively views Sinopec due to China's domestic pricing mechanism not accounting for international costs. The Strait of Hormuz disruption affects 20% of global oil flows, with China importing 6.6% of its energy via this route. China has halted fuel exports to secure supply. Asian oil stocks remain undervalued compared to global peers.

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Goldman Sachs: Oil Price Surge to Boost CNOOC, PetroChina Stocks

Goldman Sachs analysts forecast that sustained high oil prices, driven by Middle East tensions disrupting the Strait of Hormuz, will benefit Chinese oil majors CNOOC and PetroChina, while issuing a negative outlook on Sinopec.

Oil Price Surge Linked to Hormuz Disruption

  • Middle East conflicts have halted shipping through the Strait of Hormuz, through which about 20% of global petroleum liquids flow, mainly to Asia.
  • Brent crude futures rose 28% last week, the largest weekly gain since April 2020, and U.S. crude saw its biggest weekly increase since 1983.
  • Brent settled at $92.69 per barrel on Friday, with Goldman projecting it could hit $100 if Hormuz flows drop 50% for one month and stay 10% lower for 11 months.

Goldman's Buy Recommendations for CNOOC and PetroChina

  • Even with Brent at $80-$90 per barrel, CNOOC and PetroChina's full-year free cash flow could rise over 10%, according to Goldman's March 2 report.
  • Both Hong Kong-listed stocks are rated "buy" and reached 52-week highs on March 3.
  • CNOOC focuses on offshore exploration with foreign partners, while PetroChina has a broader domestic operations including refining.
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Sinopec Faces Negative View Due to Pricing Mechanism

  • Goldman analysts are less favorable on Sinopec, the world's largest refiner, which also hit a 52-week high on March 3.
  • China's domestic product pricing ceiling does not factor in higher international freight rates or official selling prices, skewing impact negatively for refiners like Sinopec.

China's Energy Security Concerns

  • China, the world's top crude importer, sources 6.6% of its total energy consumption from crude via the Strait of Hormuz, with natural gas imports adding 0.6%.
  • In response to the conflict, China has ordered state refiners to suspend diesel and gasoline exports to safeguard domestic supply.

Market Context and Valuations

  • Asian upstream oil firms, including PetroChina and CNOOC, trade at a discount versus developed market peers like ConocoPhillips, BP, Chevron, and Exxon Mobil.
  • U.S. investors face restrictions on CNOOC shares since 2021, but PetroChina shares are not subject to the same rules.
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