KUALA LUMPUR - Malaysia’s oil and gas (O&G) sector is entering a two-stage recovery, with elevated oil prices supporting near-term earnings while a rebuilding of Petroliam Nasional Bhd’s (Petronas) capital expenditure (capex) is expected to drive a gradual recovery in job flows, from 2027 onwards, according to AmInvestment Bank Bhd.
The investment bank said it expects Petronas’ capex to rebuild towards RM45 billion-RM50 billion in the full financial year 2026 to financial year 2028, from RM42 billion in 2025, supported by elevated Brent oil prices and renewed focus on energy security.
"We believe physical normalisation remains incomplete despite the latest US-Iran peace deal, with supply losses and disrupted flows still outweighing demand destruction.
"This keeps physical markets tight into the second quarter to third quarter of 2026 (2Q-3Q2026) and supports our full financial year 2026 forecast (FY2026F) of US$95 per barrel for Brent,” it said in a sector report today.
AmInvestment said Petronas would have stronger operating cash flow to fund reinvestment with Brent oil prices at US$80-90 per barrel.
"Even if Brent gives back part of the geopolitical premium, we believe the strategic case for reinvestment remains intact, as the war has reinforced the need to sustain reserves, secure domestic gas supply and protect liquefied natural gas reliability.
"Sustained Brent prices above US$80 per barrel have historically improved Petronas’ upstream spending appetite as project economics become more attractive and budget approvals gain momentum,” it added.
It said based on past cycles, upstream Petronas’ capex appears to respond with about a one-year lag, supporting the view that elevated FY2026F Brent could drive stronger activity into FY2027-FY2028.
AmInvestnment said it has also upgraded the sector to ‘Overweight’, premised on what it described as an ‘Oil pays now, capex pays later’.
Its top picks are Hibiscus Petroleum Bhd, MISC Bhd and Dialog Group Bhd for direct earnings leverage to elevated Brent prices, while Dayang Enterprise Holdings Bhd, Keyfield International Bhd and Deleum Bhd are expected to benefit from improving utilisation and activity levels as the capex recovery gains traction. - BERNAMA