Morgan Stanley has named a raft of Chinese stocks it thinks will do well as oil prices rise, including EV maker Xpeng and a number of energy companies. Oil prices have hit their highest levels since 2008 in recent weeks and are likely to stay elevated for longer, Morgan Stanley's strategists, led by Laura Wang, said in a note on Mar. 9. The bank's global oil strategist Martijn Rats estimates that Brent crude could reach $110 to $125 per barrel in the second quarter, with "large price spikes above $150/bbl" possible if there's meaningful disruptions to oil flow. The U.S has imposed a ban on Russian oil and gas while the U.K has committed to phase out oil imports from Russia by the end of the year. Other European countries are also weighing up similar moves. Oil prices have slipped since Morgan Stanley's note was published, with U.S. benchmark West Texas Intermediate crude futures trading around $95 a barrel Tuesday, and Brent crude hovering just below the $100 mark. Both, however, remain up around 30% for the year. Stocks to benefit Against this backdrop, Morgan Stanley has identified six Chinese stocks it says will benefit from a extended period of oil price spikes, including three energy upstream players or equipment providers. State-owned oil company China National Offshore Oil Company makes the bank's list as the only pure upstream player among China's Big Oil firms. Morgan Stanley believes the company can "reap the full profits" of rising oil prices given its low cost base of around $30 per barrel. The bank also likes oilfield services provider China Oilfield Services . Rising oil prices have increased demand for upstream exploration and production, which Morgan Stanley says will boost the company's workload and earnings. Oilfield equipment manufacturer Yantai Jereh Oilfield Services also makes the bank's list. Morgan Stanley believes that demand for fracking equipment is likely to increase as higher energy prices spur the Chinese government to step up its focus on energy safety and increase the budget for upstream companies to invest in shale gas. Morgan Stanley also expects electric vehicle manufacturer Xpeng to benefit from higher demand for its more affordable EV models as rising oil prices make traditional combustion engine vehicles less attractive to consumers. Solar equipment manufacturer Suzhou Maxwell Technologies also makes the Morgan Stanley's list. The company derives 90% of its revenue from the solar market and the bank expects demand for solar energy to rise in response to higher oil prices. Rounding off the list is Hong Kong-listed Kunlun Energy . The analysts expect higher oil prices to translate to higher earnings contributions from its oilfield business line.
Gas prices in Westchester are above six dollars as prices at the pump continue to rise across the Southland on Sunday, March 13, 2022 in Los Angeles, CA.
Jason Armond | Los Angeles Times | Getty Images