Malaysia's crude oil supply likely to remain under pressure in 2H25
RHB Research said this decline is moderating compared to previous quarters, indicating some stabilisation due to improved field performance and operational efficiencies, especially in mature fields.
Natural gas production may also contract slightly in the 2H25, primarily due to planned maintenance shutdowns of key facilities in Sarawak and West Malaysia, as well as moderating demand from major liquefied natural gas importers like Japan, China, and South Korea.
RHB Research estimates that the global oil market will narrow its theoretical deficit from 1.5 million barrels per day in 2024 to 0.8 million barrels per day in 2025, mainly due to a moderation in demand growth and higher supply from both the Organisation of the Petroleum Exporting Countries (Opec) and non-Opec producers.
It maintains its 2025 to 2026 Brent crude oil price estimates at US$70 to US$68 per barrel.
Price of Brent crude oil spiked up to as high as US$78 following the escalation of the Israel-Iran conflict, but the gains were quickly reversed on the expected ceasefire.
Its top stock pick for the sector includes Bumi Armada Bhd , MISC Bhd , and Yinson Holdings Bhd . It retains its 'buy' call for the stocks with target prices of 65 sen, RM9.70 and RM3.69 a share, respectively.
While there could be some clarity on the overall landscape in Sarawak, it still expects a structural shift in spending pattern by Petroliam Nasional Bhd, which may not be well replaced by Petroleum Sarawak Bhd, at least in the short and medium term.
Upstream activities are expected to pick up seasonally in the 2Q25 to 3Q25, post monsoon season.
Floating production storage and offloading (FPSO) players are likely to have relatively lower earnings risks under fixed and firm long-term charter contracts.
RHB Research believes clients would not cancel these FPSO contracts due to the fluctuation in oil prices, since these contracts are backed by compensation clauses.
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