The Oil Search Ltd (ASX: OSH) share price has started the week strongly.
In afternoon trade, the energy producer's shares are up 3.5% to $4.48.
This means Oil Search shares are now up a solid 19% in 2021.
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Why is the Oil Search share price charging higher today?
The have been a couple of catalysts for the rise in the Oil Search share price today.
The first has been a rise in oil prices on Friday night, which has given the sector a lift.
In addition, a broker note out of Morgan Stanley this morning has given its shares a boost today.
According to the note, the broker has retained its equal-weight rating but lifted its price target by 22% to $5.50.
Based on the current Oil Search share price, this implies potential upside of almost 23% over the next 12 months. And if you include the broker's 23.3 cents per share dividend forecast for FY 2022, the potential return increases to ~28%. Not bad for an equal-weight rating!
What is the broker saying?
The note reveals that Morgan Stanley has upgraded its earnings forecasts to reflect its belief that strong demand in Asia for LNG will drive prices higher over the long term. The broker now expects the long term LNG price to be almost a third higher than previously forecast at US$10 per Metric Million British Thermal Unit (MMBtu).
The broker commented: "We think Asia will consume significantly more natural gas in the early phases of the energy transition […] This will lead to higher LNG prices and better project return, improving investor sentiment towards these projects."
This would be a big positive for Oil Search and could support solid earnings and dividend growth in the coming years (along with proposed merger partner Santos Ltd (ASX: STO)). As such, the Oil Search share price could be one to watch in the coming months.
