PETALING JAYA: Hong Leong Investment Bank (HLIB) Research has maintained its bullish outlook for crude oil prices, driven by worsening supply bottlenecks and Middle East geopolitical tensions.
The Brent crude futures contract prices have returned above US$100 a barrel, with severe disruption scenarios potentially pushing prices toward US$120, the research house reckoned.
Consequently, HLIB Research has raised its 2026 average Brent price assumption to US$90 a barrel (up from US$80), expecting prices to trade around US$95 to US$100 toward the end of the year.
Its 2027 forecast was maintained at US$75 a barrel.
The research house expects the upside to crude prices to be underpinned by a few factors.
HLIB Research noted that severe chokepoint and route bottlenecks are the main factor, as traffic through the Strait of Hormuz dropped to below 10% of pre-war levels between July and September.
Alternative rerouting is constrained after drone attacks temporarily shut Saudi Arabia’s 1,200km East-West Pipeline (which carries a seven million barrels per day or bpd capacity, with five million for exports), sending Yanbu crude exports to a six-month low of 1.43 million bpd versus 3.9 million bpd in the three months prior.
Global crude oil deficit expanded sharply to approximately 4.1 million bpd in August from around 0.1 million bpd in July, and is projected to reach close to 4.8 million bpd in September.
Moreover, crude output from the Middle East region fell 7.8% month-on-month (m-o-m), with regional production shut-ins rising to 6.7 million bpd in August from five million bpd in July.
Another supporting factor for prices is China. After slowing imports following the outbreak of hostilities in the Middle East, the world’s largest crude importer saw its purchases rebound 22% m-o-m in July and 6% m-o-m in August to 37.9 million tonnes.
The country has also diversified its sourcing options to suppliers like Russia.China’s oil consumption is projected to expand to 16.4 million bpd in September.
With the bullish price fundamentals underpinning the oil and gas sector, HLIB Research maintained an “overweight” call on the industry, favouring companies with durable earnings drivers beyond short-term commodity price swings.
Its top sector pick is Dialog Group Bhd
, rated a “buy” with a target price (TP) of RM2.49 a share, on the grounds that the company offers strong earnings visibility over its financial year 2027 (FY27) and FY28.
Dialog’s upstream earnings share is expected to rise to between 30% and 40% via the Cendramas production sharing contract and Baram Junior Cluster (commencing the second quarter of FY27).
Meanwhile, downstream engineering, procurement, construction, and commissioning projects and the PT5 614,000 cu m storage expansion project for BP Singapore will bolster long-term cash flow.
HLIB Research also has a “buy” call and TP of RM1.45 a share on Dayang Enterprise Holdings Bhd, as it is in a position to directly benefit from the expected upstream capital expenditure (capex) recovery in FY27 led by Petroliam Nasional Bhd (PETRONAS).
The national oil company’s upstream capex in the first half of 2026 (1H26) was subdued at RM9bil (versus RM21.5bil in 2023 and 2024), and historically follows Brent price strength with a lag.
From the downstream angle, HLIB Research has a “buy” call and a TP of RM5.49 a share on Petronas Chemicals Group Bhd (PetChem).
The research outfit expects improving average selling prices for its products, partly due to elevated Brent prices.
At the very least, PetChem’s product prices are stabilising, while higher utilisation rates with minimal scheduled turnarounds in 2H26, alongside the potential divestment of its Pengerang Petrochemical Co stake, could provide a boost.
HLIB Research also holds “buy” calls on Bumi Armada Bhd (TP: 38 sen), Deleum Bhd (TP: RM1.41), Hibiscus Petroleum Bhd (TP: RM3), MISC Bhd (TP: RM9.22), Petronas Dagangan Bhd (TP: RM21.34), and Wasco Bhd (TP: RM1.14)
