Hong Leong Investment Bank (HLIB) Research has maintained a positive outlook on crude oil prices, citing ongoing supply constraints and geopolitical tensions in the Middle East as key drivers. The price of Brent crude futures recently rose above US$100 per barrel, with predictions that disruptions could push prices toward US$120 in severe scenarios. Reflecting these factors, HLIB Research has raised its average Brent crude price forecast for 2026 to US$90 per barrel, up from a previous estimate of US$80, while maintaining its 2027 forecast at US$75 per barrel. Prices are expected to trade between US$95 and US$100 toward the end of this year.
A significant contributor to the supply pressure is the disruption of key oil transit routes and infrastructure. Traffic through the Strait of Hormuz, a crucial chokepoint for global oil shipments, declined to less than 10% of pre-conflict levels between July and September 2026. Supply rerouting options are limited following drone attacks that temporarily halted operations on Saudi Arabia’s East-West Pipeline. This 1,200-kilometer pipeline, which has a capacity of seven million barrels per day (bpd)—including five million bpd for export—saw its throughput decline sharply, resulting in Yanbu crude exports dropping to a six-month low of approximately 1.43 million bpd, down from an average of 3.9 million bpd in the preceding three months.
The global crude oil market has tightened considerably, with a deficit expanding to around 4.1 million bpd in August from roughly 0.1 million bpd in July, and forecasts suggesting it could reach close to 4.8 million bpd in September. Additionally, crude production in the Middle East declined by 7.8% month-on-month in August, with production shut-ins rising from five million bpd in July to approximately 6.7 million bpd.
China, the world’s largest crude importer, has also influenced market dynamics. After reducing imports immediately following the outbreak of hostilities in the Middle East, China’s crude purchases rebounded by 22% month-on-month in July and 6% in August, reaching 37.9 million tonnes. The country has diversified its supply sources to include countries like Russia, and its oil consumption is projected to grow to 16.4 million bpd in September.
Against this backdrop, HLIB Research has maintained an “overweight” rating on the oil and gas sector, favoring companies with stable earnings prospects beyond short-term commodity price movements. Its top recommendation is Dialog Group Bhd, rated a “buy” with a target price of RM2.49 per share. The company’s earnings from upstream activities are expected to rise significantly starting in the second quarter of its financial year 2027, supported by contracts such as the Cendramas production sharing contract and the Baram Junior Cluster. In addition, Dialog’s downstream projects, including engineering, procurement, construction, commissioning work, and a 614,000 cubic meter storage expansion for BP Singapore, are expected to strengthen long-term cash flow.
HLIB also has “buy” ratings on Dayang Enterprise Holdings Bhd, with a target price of RM1.45 per share, benefiting from a forecasted recovery in upstream capital expenditure led by Petroliam Nasional Bhd (PETRONAS), whose upstream spending was subdued in the first half of 2026 compared to previous years. PETRONAS Chemicals Group Bhd (PetChem) is another favored stock, with a target price of RM5.49, supported by stabilizing product prices and higher utilisation rates, along with the potential divestment of a stake in Pengerang Petrochemical Co.
Other companies under “buy” recommendations include Bumi Armada Bhd, Deleum Bhd, Hibiscus Petroleum Bhd, MISC Bhd, PETRONAS Dagangan Bhd, and Wasco Bhd, with target prices ranging between RM0.38 and RM21.34 per share.