PETALING JAYA: BIMB Securities Research remains constructive on the oil and gas (O&G) sector, as elevated crude prices and lingering physical supply tightness continue to support earnings momentum across upstream and selected service players.
The research house, which maintained an “overweight” call, said investors should continue accumulating O&G counters as a hedge against inflation risk.
It has retained Hibiscus Petroleum Bhd
as its top sector pick because of the company’s direct leverage to stronger oil prices and expanding production profile.
The bullish stance comes despite a recent ceasefire between the United States and Iran, which has eased broader market sentiment but failed to fully resolve disruptions in physical oil supply.
BIMB Securities noted that while futures markets have reacted positively to reduced geopolitical tension, the physical crude market remains under strain, reflected by dated Brent holding above US$120 per barrel, at roughly a US$30 premium over Brent futures since early April.
According to the report, the ceasefire has not materially narrowed this premium, underscoring that prompt supply conditions remain constrained despite improved headline sentiment.
This divergence suggests refiners and physical buyers are still paying elevated prices to secure near-term cargoes, indicating that actual supply remains tighter than futures pricing implies.
BIMB Research said the premium in dated Brent reflects both geopolitical risk and actual disruptions across the oil supply chain.
It estimated that around four to five million barrels per day of effective supply remain affected globally across upstream production, refining capacity and logistics systems.
While this is not severe enough to trigger a structural global shortage against total demand of around 105 million barrels per day, the breadth of disruptions is still sufficient to keep physical balances tight.
The research house highlighted that much of the damage to facilities and transport infrastructure falls into the medium-severity category, meaning recovery is possible but unlikely to be immediate.
It expected production and export flows, particularly through the Strait of Hormuz, to normalise only gradually from the third quarter of 2026 onward.
Against that backdrop, BIMB Research raised its 2026 Brent crude forecast to US$95 per barrel from US$85 previously.
“We believe this adjustment is necessary to better reflect the actual economic impact of tight physical supply conditions, rather than relying predominantly on futures pricing as a financial benchmark, which may understate near-term stress in the system.
“In this context, we advocate investors to closely monitor developments in the physical market, as excessive reliance on futures could lead to complacency and leave positioning vulnerable,” it explained.
Among listed O&G counters, Hibiscus stands out because of its earnings sensitivity to crude price movements.
BIMB Research has a “buy” call on the counter with a target price of RM2.60, versus a closing price of RM2.15 as at April 15, implying upside potential supported by strong earnings growth.
Its projected FY26 price-earnings ratio of only four times also makes it one of the cheapest upstream names under coverage.
An analyst told StarBiz that earnings resilience is supported by sustained high earnings before interest, taxes, depreciation, and amortisation margins, especially among upstream and asset-heavy operators, although service providers may experience more selective upside depending on contract execution and utilisation rates.
He believes the sector remains one of Bursa Malaysia’s strongest inflation hedges in the current environment, particularly while physical crude dislocations persist.
