PETALING JAYA: The oil and gas sector is likely to remain resilient as elevated crude prices support upstream earnings and sustain demand for energy infrastructure.
The sector could, however, see increasingly divergent fortunes across its upstream, midstream and downstream segments as high feedstock costs and logistical disruptions reshape industry dynamics.
MBSB Research maintained its “positive” rating on the sector, saying crude oil prices are likely to remain elevated through late 2026 before easing in 2027, based on forecasts from the US Energy Information Administration (EIA) and S&P Global Energy.
“The core takeaway from the EIA and S&P forecasts is that the crude oil market has transitioned from a temporary shock into a persistent new normal, characterised by structural supply disruptions, maritime chokepoint risks and refining bottlenecks,” the brokerage said.
The EIA’s September Short-Term Energy Outlook forecasts Brent crude at an average price of US$91 per barrel in 2026, up 34% from the 2025 average, before easing to US$74 in 2027.
S&P, meanwhile, expects Brent to average US$90 or higher this year and US$85 in 2027, although prices could remain volatile within a US$80 to US$100 range.
MBSB Research said the higher-price environment would create a mixed impact for Malaysia, which is a net exporter of crude oil and liquefied natural gas (LNG), but a net importer of refined petroleum products.
For Petroliam Nasional Bhd (PETRONAS), higher Brent prices should lift earnings and potentially strengthen government revenues. Every US$1 per barrel sustained increase in Brent is estimated to generate about RM300mil to RM350mil in additional annual government revenue through petroleum income tax, royalties and dividends.
However, the fiscal benefit could be partly offset by higher fuel subsidy costs.
“The fiscal windfall, however, is largely offset by Malaysia’s blanket and targeted fuel subsidies,” MBSB Research said, noting that maintaining retail petrol at RM1.99 per litre puts pressure on federal spending.
Within the industry, upstream players are expected to outperform as non-Middle Eastern exploration and production companies benefit from stronger realised prices and higher operational demand.
Mid-stream operators could also gain from longer shipping routes caused by disruptions around the Strait of Hormuz and Bab-el-Mandeb, alongside stronger demand for buffer storage.
Downstream players face a tougher environment, with refiners and petrochemical producers likely to experience margin compression as high crude input costs become harder to pass on to consumers.
MBSB Research said oil and gas players should focus on capital flexibility, operational efficiency and diversification, including artificial intelligence-driven operations to reduce operating costs and investments in lower-carbon businesses.
Its top picks are MISC Bhd
, with a target price of RM9.22, and Dialog Group Bhd, with a target price of RM2.57.
MISC is favoured for its defensive balance sheet, visible long-term cash flows and expanding order book of modern dual-fuel LNG carriers, while Dialog is expected to benefit from recovering long-term tank terminal storage demand, recurring plant maintenance income and upstream assets.
Meanwhile, one analyst told StarBiz that higher crude prices should continue to support investment activity across Malaysia’s upstream and oilfield services ecosystem.
“The benefits, however, will vary depending on companies’ exposure to exploration, production and infrastructure spending,” he pointed out.
He added that firms with recurring income, strong balance sheets and long-term contracts should be better positioned to navigate the current volatile oil market.
