The oil and gas sector is expected to remain resilient through late 2026, supported by sustained high crude oil prices that bolster upstream earnings and maintain demand for energy infrastructure, according to industry analysis. However, the sector may experience varied outcomes across its upstream, midstream, and downstream segments due to rising feedstock costs and ongoing logistical challenges.
MBSB Research reaffirmed a positive outlook on the sector, citing forecasts from the US Energy Information Administration (EIA) and S&P Global Energy that project crude oil prices will stay elevated before easing in 2027. The EIA’s September Short-Term Energy Outlook anticipates Brent crude averaging about US$91 per barrel in 2026—a 34% increase from 2025—before declining to around US$74 in 2027. S&P Global Energy similarly forecasts Brent crude to average US$90 or higher this year and US$85 in 2027, though prices may remain volatile within a range of US$80 to US$100 per barrel.
The brokerage noted that these forecasts reflect a shift toward a “new normal” marked by structural supply disruptions, risks associated with maritime chokepoints, and refinery bottlenecks. This environment is expected to create mixed implications for Malaysia, which exports crude oil and liquefied natural gas (LNG) but imports refined petroleum products.
For Petroliam Nasional Bhd (PETRONAS), elevated Brent prices are likely to enhance earnings and potentially increase government revenues. Each sustained US$1 rise per barrel in Brent crude is estimated to generate an additional RM300 million to RM350 million annually for the government through petroleum income tax, royalties, and dividends. However, these fiscal gains may be partly offset by Malaysia’s fuel subsidies, which keep retail petrol prices at RM1.99 per litre and place pressure on federal spending.
Within the oil and gas value chain, upstream companies stand to benefit the most amid stronger realized prices and increased operational demand, particularly those outside the Middle East. Midstream operators may also gain from longer shipping routes caused by disruptions near the Strait of Hormuz and Bab-el-Mandeb, as well as the need for increased buffer storage capacity. Conversely, downstream players, including refiners and petrochemical producers, face challenges as high crude input costs squeeze margins, with difficulties passing increased expenses on to consumers.
MBSB Research advised companies in the sector to prioritize capital flexibility, operational efficiency, and diversification efforts, such as leveraging artificial intelligence to reduce costs and investing in lower-carbon initiatives. The firm identified MISC Bhd and Dialog Group Bhd as preferred stocks, citing MISC’s strong balance sheet, reliable long-term cash flows, and expanding fleet of modern dual-fuel LNG carriers, along with Dialog’s anticipated recovery in tank terminal storage demand, steady plant maintenance income, and upstream assets.
An industry analyst also highlighted that while higher crude prices are likely to encourage investment across Malaysia’s upstream and oilfield services sectors, the benefits will vary based on companies’ exposure to exploration, production, and infrastructure activities. Firms with recurring income, solid financial standing, and long-term contracts are expected to be better positioned amid the current market volatility.