PETALING JAYA: Continued growth in upstream investments by Petroliam Nasional Bhd (PETRONAS) will remain a key support for Malaysia’s oil and gas (O&G) activities, says RHB Research.
In a note, the research house explained that while PETRONAS’ capital expenditure (capex) in the first-half period looked substantial, focus should instead be on the upstream segment.
“PETRONAS’ capital investments reached RM41.4bil in the first half of financial year 2026 (1H26), although the headline figure was skewed by the downstream sub-sector, which accounted for RM26bil, or 63%, of the total.
“The skew was mainly driven by an additional capital injection into the Pengerang Refining and Petrochemical joint venture as part of PETRONAS’ transaction to attain full ownership of the complex.
“Hence, we believe upstream capex is the more relevant indicator, rising 19% year-on-year to RM8.7bil in 1H26,” it said.
RHB Research also pointed out that geopolitical tensions are expected to provide near-term support to oil prices, petrochemical prices and freight rates.
It kept its Brent crude oil price forecasts unchanged at US$89 per barrel for 2026 and US$72 per barrel for 2027.
The research house said that oil prices are unlikely to immediately revert to pre-war levels even with a ceasefire or reopening of the Strait of Hormuz.
The key constraint is now physical capacity, rather than solely geopolitical risk.
Kpler estimates Middle East refinery runs at just 7.3 million barrels per day (mbpd) in August versus 9.9 mbpd pre-war, with the region losing around four mbpd of refined-product supply since the conflict began.
“It expects a gradual recovery from the fourth quarter of financial year 2026 (4Q26), but a return to pre-war throughput only from 2Q27, as damaged facilities require lengthy repairs and replacement of critical equipment.
“This is reinforced by Qatar, where 17% of liquefied natural gas (LNG) capacity remains offline, and repairs to two damaged LNG trains could take up to three years.
“Rystad Energy’s April assessment estimated US$34bil to US$58bil of repair and restoration costs across the regional energy infrastructure, including US$30bil to US$50bil for O&G facilities.
“As such, even if geopolitical risk premiums fade, the physical supply deficit should unwind only gradually, providing continued support to oil, refined product and freight markets.”
Meanwhile, RHB Research said midstream fundamentals remained resilient.
Tanker rates were already strengthening prior to the recent conflict, supported by higher crude exports, longer-haul trade flows and tight vessel supply.
“While geopolitical risk premiums may moderate, we expect tanker rates to remain above last year’s levels.
“Meanwhile, LNG shipping markets have shown signs of recovery from trough levels, with improving charter rates supporting a more stable earnings outlook.”
As for petrochemical prices, they have diverged following the initial war-driven spike.
While urea and ammonia prices have corrected from their earlier peaks as supply concerns eased, methanol prices have strengthened amid persistent Middle East supply disruptions and tighter availability.
RHB Research expects petrochemical prices to remain volatile in the near term, with the outlook increasingly dependent on the pace of supply restoration and geopolitical developments rather than a broad-based normalisation across the complex.
“For Petronas Chemicals Group Bhd
, the divergent pricing environment provides limited broad-based margin support, with weaker urea and ammonia prices partly offset by stronger methanol prices.
“We believe the recovery in plant utilisation remains the more important near-term earnings driver,” it added.
Commenting on the 2Q26 sector earnings, RHB Research called it a “highly polarised results season”.
Nine of the 10 companies under its coverage reported their latest quarterly results last month.
Five of the companies chalked an outperformance.
The remaining four missed estimates, and none reported broadly in-line results.
“The deviations were largely driven by company-specific factors including stronger tanker rates, margin recovery, and higher project conversion on the upside, versus weaker project execution, lower utilisation, supply chain disruptions, and operational disruptions on the downside.”
On a market cap-weighted basis, however, RHB Research viewed the reporting season as skewed positively, as the stronger- than-expected performances of key large-cap names outweighed the earnings misses.
