BIMB Research maintained its “overweight” stance on the oil and gas sector.
PETALING JAYA: The oil and gas (O&G) sector is expected to enter a more stable period, as price risks appear limited and investment activity gradually rebuilds.
According to BIMB Research, despite persistent oversupply concerns in the crude oil market, downside risks appear contained given the slower-than-expected inventory accumulation.
The research house forecasts Brent crude oil to average at US$66 per barrel in 2026.
Its projection is anchored on the view that bearish expectations are already largely reflected in prices.
BIMB Research noted that while oil sentiment remains guarded following projections from the International Energy Agency of sizeable inventory builds of 2.4 million barrels per day (bpd) in 2025 and 1.8 million bpd in 2026, year-to-date builds have been materially smaller at about 1.3 million bpd.
By comparison, the Energy Information Administration is less pessimistic, forecasting builds of 1.8 million bpd in 2025 easing sharply to 0.3 million bpd in 2026.
BIMB Research maintained its “overweight” stance on the oil and gas sector, favouring companies with long-term earnings visibility, solid growth potential, and decent dividend yields.
Its top picks are Malaysia International Shipping Corp Bhd (MISC), with a target price (TP) of RM9.80: Hibiscus Petroleum Bhd
(TP: RM2.10) and Malaysia Marine and Heavy Engineering Holdings Bhd (MMHE) (TP: 94 sen).
The research house said that it is optimistic about MISC’s growth outlook.
This optimism is underpinned by robust demand for floating, production, storage and offloading (FPSO) units, particularly in frontier markets such as Brazil, Guyana, Suriname, and Angola.
For Hibiscus, BIMB Research highlighted production-led upside, noting that the company continues to pursue its growth strategy to lift production to 35,000 to 50,000 barrels of oil equivalent per day (boepd) from 28,000 boepd currently, offering strong volume-driven earnings momentum.
BIMB Research pointed out that MMHE is expected to deliver stronger profits in the coming quarters on improving margins as its long-delayed offshore windfarm high-voltage direct current project commences.
Other “buy”-rated stocks under coverage include Dialog Group Bhd (TP: RM2.20), Velesto Energy Bhd (TP: 34 sen), Vantris Energy Bhd (TP: 72 sen) and T7 Global Bhd (TP: 40 sen).
Meanwhile, the research house noted that Petroliam Nasional Bhd (PETRONAS) has reiterated its ambition to raise and sustain Malaysia’s O&G production at two million boepd, last achieved in 2017.
BIMB Research pointed out that with most local fields now mature, higher capital expenditure (capex) is essential merely to offset natural decline.
It noted that PETRONAS increased upstream capex by 20% year-on-year (y-o-y) to RM16.5bil in 2024, yet national output rose only 0.1% y-o-y to 1.836 million boepd in the first nine months of 2025, underscoring the structural need for sustained investment.
The research house also drew attention to carbon capture and storage as an emerging workstream.
It cited progress on Kasawari, Lang Lebah and the Bujang, Inas, Guling, Sepat and Tujoh gas field cluster projects following the enforcement of the Carbon Capture, Utilisation and Storage Act 2025.
The research house said early-stage activity is already filtering through to the supply chain, reinforcing the longer-term opportunity for offshore service providers.
Looking ahead, BIMB Research expects gas-related investments to gather pace, supported by rising power demand from data centres and commitments from players such as Shell, TotalEnergie, Inpex, and ConocoPhillips.
It added that project sanctioning momentum should strengthen over the next six to 12 months, supported by stable oil prices, normalising service rates and a visible pipeline of FPSO vessels and offshore facility awards from 2026.
