PETALING JAYA: Malaysia’s efforts to diversify its crude oil supply amid global geopolitical uncertainties appear to be paying off, with the country becoming less reliant on Middle Eastern sources and increasingly tapping supplies from Africa and other regions.
Economist Yeah Kim Leng described the shift as a “highly successful” rebalancing of Malaysia’s energy import sources, saying it would strengthen the resilience of the economy.
He said the shift would also better position Malaysia to withstand future energy shocks, particularly those stemming from disruptions in the Strait of Hormuz.
Yeah said the rapid diversification over the past six months reflected both the urgency created by the crisis and the need to ensure economic growth was not disrupted by energy shortages.
“This was particularly important given the dependence of a wide range of industries on oil and gas for energy and petrochemical feedstock.
“The spectrum of industries that depend on oil and gas, alongside petrochemical feedstocks, spans from fertiliser to plastics and other speciality gases and materials that are important to many critical industries,” he said.
In a report yesterday, Phillip Capital Research said Malaysia has become less reliant on crude oil supplies linked to the Strait of Hormuz, with imports from African countries gaining share.
“The broader sourcing base has reduced Malaysia’s vulnerability to Strait of Hormuz disruptions, strengthening the resilience of its crude oil supply,” it noted.
Citing data from the Statistics Department, the research house said Hormuz-linked countries accounted for roughly two-thirds of Malaysia’s crude oil imports between 2023 and 2025.
But reliance on these sources had already been declining, falling from 74.7% in 2023 to 59.1% in February 2026.
“The disruption nevertheless accelerated a significant rebalancing of Malaysia’s crude oil import sources,” it added.
“Their share fell to 32.3% in March to July 2026, below that of African suppliers, whose share increased to 35.6% from 19.6% previously.”
The research house classified Saudi Arabia, the United Arab Emirates (UAE), Kuwait, Qatar, Iraq, Bahrain and Iran as Hormuz-linked suppliers, leaving Oman out of the classification.
Saudi Arabia, previously Malaysia’s largest source of crude oil, saw its share fall sharply to 7% in March to July 2026 from 32.6% in January 2025 to February 2026.
Still, the UAE, another Hormuz-linked supplier, became Malaysia’s largest source, with its share edging up to 21.1% from 20.5%.
Oman, Sudan and Angola were among the biggest beneficiaries, with their shares rising to 16.1%, 13.3% and 9.3%, respectively, from 8.6%, 7.6% and 1.5% previously.
The United States remained a source of supply, although its share eased to 5.3% from 6%, while Cameroon’s share rose to 5.9% from 4.5%. The share of imports from other countries also rose to 22% from 18.7% previously.
Phillip Capital Research said the changes showed Malaysia had adapted “relatively well” to the changing supply environment by diversifying its crude oil import sources.
The research house used the Herfindahl-Hirschman Index (HHI) to measure the concentration of Malaysia’s crude oil imports, with a lower HHI indicating greater diversification.
Its analysis showed that the HHI fell to 1,131 in March to July 2026 from 1,710 in January to February 2026.
“Our HHI analysis further indicates that the improvement in diversification was driven less by an increase in the number of suppliers, but by a more balanced distribution of import shares, reflecting lower
reliance on previously dominant sources, particularly Saudi Arabia,” it said.
Malaysia consumes around 700,000 barrels of crude oil per day, roughly double its domestic production of 350,000 barrels per day, according to the Finance Ministry.
This leaves the country vulnerable to supply disruptions, given its previous reliance on Middle Eastern oil to meet domestic consumption.
Against this backdrop, Phillip Capital Research said the now lower concentration of Malaysia’s crude oil imports strengthens the country’s energy resilience.
“The sharp decline in Malaysia’s import concentration and reduced reliance on Hormuz-linked suppliers suggest that the country is now better positioned to withstand future disruptions, thus reducing the risk of a prolonged crude oil shortage that could affect domestic economic activity,” the research house noted.
An industry observer said Malaysia’s ability to diversify its crude oil sources showed that the country had weathered the supply disruption “decently”.
“The security of supply is basically there,” he said.
He pointed to recent comments by Nurhisham Hussein, economic adviser at the Prime Minister’s Office, that Malaysia’s fuel supply remained stable despite lower global supply levels, with the government confident of securing sufficient supplies through the end of the year.
Nurhisham also heads the secretariat of the Crisis Management Task Force under the National Economic Action Council.
For Malaysia, the diversification means greater flexibility in choosing suppliers based on availability and cost.
The industry observer said crude oil was a commodity and, as long as Malaysia could secure sufficient supplies when needed, the source of the crude was less important. “Oil is oil. Crude is crude. It is a commoditised product. It doesn’t matter where you get it from.”
He added that securing supply was largely a government-to-government matter, with Malaysia addressing the situation “day by day, step by step”.
Meanwhile, an oil and gas executive said the change in ownership of Pengerang Refining Company Sdn Bhd and Pengerang Petrochemical Company Sdn Bhd, collectively known as PRefChem, had given Petroliam Nasional Bhd (PETRONAS) greater flexibility to source crude oil from other regions.
PRefChem operates the 300,000-barrels-per-day refinery at the Pengerang Integrated Complex, which was previously jointly owned by PETRONAS and Saudi Aramco. Under the original arrangement, Aramco was to supply 50% of the refinery’s crude feedstock requirements, with an option to increase this to 70%.
Following Aramco’s exit from PRefChem, the executive said the national oil company could now source crude from elsewhere, including Africa.
“That is allowing us to have a free hand to import from anywhere we like. Earlier, we were tied to that,” he told StarBiz.
“After the Aramco exit, that allowed us to go to all the African countries and into West Africa.”
Still, the current shift in sourcing is unlikely to represent a permanent departure from Middle Eastern crude.
Yeah said Malaysia was unlikely to completely move away from Mideast suppliers once conditions in the Strait of Hormuz normalised, with cost remaining a key consideration alongside supply reliability.
“The government needs to strike a balance between stability in the supply and the cost,” he said, adding that some reversal in sourcing was “inevitable” once the situation stabilises.
He said maintaining a “nimble” sourcing strategy would allow Malaysia to balance supply resilience with profitability and international competitiveness.
Yeah said Malaysian industries would also need to explore alternative energy sources, including biomass, solar and other renewables, as sustainability and carbon emissions become increasingly important to international competitiveness.
He said this was particularly relevant as advanced economies increasingly imposed carbon taxes on imports.
“Profitability is important, but of course, sustainability too,” he said.
