Global oil prices have increased, largely due to high Asian demand and in particular from China's spiralling fuel imports, which accounts for up to 8 per cent of global consumption.

In addition, oil-producing countries like Iran, Nigeria, and Iraq have faced political problems that have disrupted supply.

Analysts warned that Asia's economic growth was leading to supply concerns.

One analyst from Trinity Securities said defensive energy stocks were a buffer against market volatility. He said rising oil prices had attracted investors and speculators alike to overweight the sector again, adding that his company had shifted recommendation over energy stocks from neutral to overweight, recommending PTT, PTTEP and Banpu for potential investors.

Siam City Securities said in a report released recently that it had shifted recommendations on energy stocks from "neutral" to "bullish", because of high oil prices and refinery costs, which are likely to remain high for the foreseeable future. The company believes the Asian economy will continue to grow, as will oil consumption in China and India.

It is expected that refinery costs this year and next will continue to be as high as US$7.70 (Bt294) per barrel, the same as for 2004-05.

Siam City Securities chose TOP as its top pick for energy stocks, because the company had a refinery that would make it most likely to benefit from the current high oil prices. In addition, TOP is a favourite to win the upcoming independent power-plant auction, which would be a key factor in boosting its income. The securities firm set TOP's price at Bt78 per share.

The Trinity Securities analyst added that PTT was a solid stock with continued high earnings that were likely to grow 8 per cent this year over the same period last year. PTT's target price is Bt264.

He recommended "buy" for PTTEP, despite the recent stock-price surge, because the business was likely to grow continually with a target price of Bt620 per share over the next 12 months.

The Trinity analyst recommended "trading" for TOP, with a target price of Bt63 to Bt69, and expected TOP's net profit to fall 16 per cent from last year, due mainly to suspicions that refinery costs may not be as high as expected.

An analyst from Kim Eng (Thailand) advised investors to sell PTTEP and Banpu, which they surmised had hit their peak, due to rising oil prices and the current positive sentiment in the stock market. He recommended investors shift to PTT and TOP.

Capital Nomura Securities kept its "neutral" recommendation for energy stocks, saying crude oil prices would maintain their high price for a while longer.

The securities firm expects oil prices to drop during this quarter, due to lower seasonal demand. But refinery costs for this quarter should be positive, the company predicts.

Oil prices might increase if the world economy recovers, particularly in Asia - especially Japan - and Europe.

Capital Nomura recommended "buy" for PTT, with a current price-to-earnings ratio of 8.3, which is relatively low compared with that for other industries.

Siriporn Chanjindamanee

The Nation