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New Straits Times
7 days ago
- Business
- New Straits Times
Global oil price surge to have dual impact on Malaysia
KUALA LUMPUR: The surge in global oil prices poses a mixed effect on Malaysia's economy, with the local energy-related stocks seeing immediate gains. The likes of Velesto Energy Bhd, Bumi Armada Bhd, Hibiscus Petroleum Bhd and Dialog Group Bhd saw their shares rising on Friday as oil prices jumped following rising geopolitical tensions in the Middle East. Industry observers, however, said stronger oil prices may drive up fuel and transportation costs, leading to broader inflationary pressures. Oil prices surged more than nine per cent on Friday to around US$75, their highest in almost five months, after Israel struck Iran. Brent crude futures jumped US$6.29, or 9.07 per cent, to US$75.65 a barrel by 0315 GMT after hitting an intraday high of US$78.50, the highest since Jan 27. US West Texas Intermediate crude was up US$6.43, or 9.45 per cent, at US$74.47 a barrel after hitting a high of US$77.62, the loftiest since Jan 21. Reuters reported that Friday's gains were the largest intraday moves for both contracts since 2022 after Russia invaded Ukraine, causing energy prices to spike. Pressure on inflation Economist Samirul Ariff Othman told Business Times that rising oil prices may drive up fuel and transportation costs. This will lead to broader inflationary pressures across consumer goods and business operations, particularly in sectors such as manufacturing and palm oil. At the same time, he said trade and logistics may come under strain due to potential shipping reroutes and rising freight charges. "Regional equities and currencies often react negatively to spikes. Asia saw stock drops immediately after today's strike. "However, Malaysia is also an oil and gas (O&G) exporter, so government revenue and energy sector profits will benefit, partially offsetting broader inflation pressures," he said. Samirul said if the conflict remains contained and no critical energy facilities are targeted, prices may retreat to US$70-US$75 per barrel, maintaining elevated risk premiums but not exceeding historical averages. However, if tensions escalate or the conflict persists, the situation could trigger a more sustained increase in prices. "Supply-chain barriers, through both oil and shipping lane disruptions, could keep prices elevated for months, potentially into the US$90 to US$120 range," he added. Samirul said the intraday surge in oil prices is deeply significant, as it constitutes one of the largest one-day moves in recent years. "Historically, such spikes have occurred only during major shocks, like the 2022 Ukraine war or 1970s oil-crisis era," he said. Worst case scenario Samirul also noted that global analysts at JP Morgan have warned that current oil prices already factor in a seven per cent probability of a worst-case supply disruption scenario, where prices could hit US$120 per barrel. "Yet if Iran retaliates, striking energy infrastructure or disrupting the Strait of Hormuz, the spike could accelerate and deepen. "If they don't, prices may ease back toward the low-US$70s, although elevated risk premiums could maintain somewhat higher levels than pre‑shock," he added. The economist explained that an escalation would likely affect global supply through two primary channels. The first is actual disruption, where Iran might launch direct attacks on oil tankers or production facilities in the region, with worst-case scenarios putting up to 20 million barrels per day (bpd) at risk. The second is a precautionary risk premium, where even in the absence of physical damage, heightened fears could lead to the closure of key shipping routes such as the Strait of Hormuz. "The World Bank models a 500,000 to two million bpd loss as 'small disruption' and six-eight million bpd in 'large disruption' scenarios. "That could drive prices sharply higher up by 20 to 75 per cent and force global supply chains to reroute, adding cost and time," he explained. Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the sharp increase in Brent crude prices was mainly driven by Israel's strike on Iran, noting that geopolitical factors typically cause short-term shocks to oil prices. "After a while it would fade and it will go back to the fundamental aspect of the industries where the demand for oil is expected to trend lower as global growth momentum is expected to moderate based on the recent downward revision by the International Monetary Fund and World Bank," he said. Afzanizam noted that members of the Organisation of the Petroleum Exporting Countries and its allies (Opec+) had agreed to increase oil supply during their meeting in May this year, pointing to stable global growth and solid market fundamentals as the basis for the decision. "On that note, there are no issues on supply of oil and therefore, the sharp spike in crude oil prices are likely to be unsustainable," he said. He added that the price surge is temporary and primarily driven by geopolitical tensions. "Fundamentally speaking, the global oil supplies are sufficient and the expected moderation in global growth would demand for oil would remain fairly stable. The price spike looks like a temporary knee-jerk reaction," Afzanizam said. Hot stocks On Friday, Bursa Malaysia's Energy Index, which boasts 31 stocks, opened at 735.96 and climbed 2.01 per cent, gaining 14.63 points to end the day at 740.76. Meanwhile, the benchmark FTSE Bursa Malaysia KLCI fell by 0.56 per cent, shedding 8.51 points to close at 1,518.11. UOB Kay Hian Wealth Advisors Sdn Bhd head of investment research Mohd Sedek Jantan said markets were in the process of repricing geopolitical risk, with Brent crude potentially surging past US$80 per barrel. "In the short term, this presents a tactical opportunity for oil and gas sector trades. "Unlike the relatively short-lived two-week spike observed during the early phase of the Russia-Ukraine war, the duration of the current oil price shock could prove to be longer-lasting," he said. Sedek added that stocks worth trading on short-term oil price momentum are the stocks that have upstream exposure or increasing mix of upstream concessions vs performing O&G services. Among the most actively traded stocks, Velesto climbed 2.78 per cent to finish at 18.5 sen, while Bumi Armada edged up 2.08 per cent to 49 sen. Dialog Group advanced 3.97 per cent to RM1.57, and Perdana Petroleum rose 5.56 per cent to 19 sen. On the top gainers list, Petron Malaysia Refining & Marketing Bhd increased 3.74 per cent to close at RM3.88, while Hibiscus Petroleum surged 7.10 per cent, closing at RM1.66. Meanwhile, Deleum Bhd gained 6.21 per cent to RM1.54, Yinson Holdings added 1.29 per cent to RM2.36, and Wasco Bhd was up 4.35 per cent to close at 96 sen.
New Straits Times
30-04-2025
- Business
- New Straits Times
Petronas-Petros clarity needed to stem investment outflow: Analysts
KUALA LUMPUR: Sarawak could be looking at a broader pattern of foreign direct investment outflow barring greater regulatory clarity, several analysts suggested. Speaking to FMT, senior consultant Samirul Ariff Othman said a mix of local and international challenges motivated the recent ConocoPhilips exit from the Salam-Patawali project. The US oil major's exit from Salam-Patawali comes months after another foreign oil and gas company, Thailand's PTTEP, shelved the Lang Lebah gas project until 2026. Industry observers point to the ongoing regulatory uncertainty caused by the unresolved Petronas-Petros settlement as causing this two-year delay, as reported by Scoop. While each project has unique challenges, the back-to-back cancellations suggest a potential emerging trend influenced by economic pressures and regulatory uncertainties," Samirul from Global Asia Consulting said. In 2025, an ongoing trade war between the United States and various countries has triggered other economic risks. These include fears of inflation and recession, as well as falling oil prices. "Fluctuating global energy prices and economic uncertainties can impact investment decisions in large-scale O&G projects. "The combination of rising costs, global market volatility, and unresolved local disputes may lead other investors to reassess their commitments in the region," Samirul said. Jamil Ghani, a former analyst with the Malaysia Petroleum Resources Corporation, told FMT that regulatory clarity is of utmost importance to stabilise Malaysia's business environment. "Regulatory uncertainty - especially the unresolved role of Petros as the state's designated gas aggregator - risks amplifying investor anxiety. Although Petronas has confirmed that discussions with Petros are ongoing, ambiguity around intermediary or middleman arrangements undermines confidence at a time when national cohesion is critical," Jamil said, referring to the federal government's insistence that Petronas' contracts remain untouched with no middleman involved. Amid a challenging global environment, he stressed that Malaysia cannot afford the perception of internal disunity - least of all in its strategic energy sector. "If Petronas is to remain a bulwark of national stability, policy cohesion and operational continuity must take precedence," Jamil added. "That means Sarawak and the federal government must urgently stabilise the current dispute for the economic resilience of an entire nation." Long-term regulatory clarity is crucial for attracting and retaining foreign partners in Malaysia's upstream sector. "Clear and stable fiscal terms, along with consistent enforcement of production sharing contracts, are essential to maintain investor confidence," Samirul said. Challenges ahead According to Upstream, the Salam-Patawali was not a large project but a pivotal one considering Malaysia's ambitions to raise oil and gas production. The standalone development, which involved a floating vessel capable of handling over 100 million cubic feet of gas, was well-supported by Petronas. According to Upstream Online, Petronas is keen to continue the project but cannot take it forward alone for the time being due to lack of capacity. Pritish Bhattacharya, a research officer at Singapore's ISEAS-Yusof Ishak Institute, told FMT Sarawak's push for oil and gas autonomy has put Petronas's monopoly at risk, with broader repercussions for the national economy and local industry. Pritish said the implications for the overall Malaysian economy are still "very hard to quantify". "(On the other hand), the potential loss of Petronas's resource access will create spillover challenges for international oil companies that are accustomed to centralised dealings," he said. This will be a concern especially in terms of foreign investments. These investors have essentially dealt only with Petronas in their dealings in Malaysia, and it could complicate matters if they now have to work with Petros. Jamil said the sector's domestic value chain is wide and vulnerable. According to the statistics department, there were 2,894 establishments engaged in oil and gas services and equipment activities as of the latest census.
Malay Mail
22-04-2025
- Business
- Malay Mail
Billions at stake as experts say Sarawak's ambitious plans lack key groundwork
KUALA LUMPUR, April 22 — Sarawak must take a more cautious approach in evaluating its mega projects amid global economic uncertainties, said analysts who warned that these would falter unless the state addresses major issues. Free Malaysia Today reported that the call follows Sarawak Premier Tan Sri Abang Johari Openg's announcement of a review of development policies in light of shifting global trends. Experts warn that factors such as talent shortages, high costs, and demand risks could undermine major initiatives like the new airport, transport system, and gas roadmap. Asrul Hadi Abdullah Sani of ADA Southeast Asia said a lack of skilled workers could threaten both construction and long-term operations. 'One of the main risks associated with Sarawak's mega-projects, such as Air Borneo and Petros, is the shortage of talent for key roles and the general workforce," he said in the report. 'Non-Sarawakian Malaysians have always been required to get a permit to work in Sarawak'. He suggested that easing immigration rules could help attract more skilled workers from outside the state. According to Samirul Ariff Othman of Global Asia Consulting, the proposed new airport, designed for 15 million passengers annually, could face underutilisation. 'This expansion is seen as a strategic move to boost tourism and business travel, enhancing Sarawak's connectivity and economic growth,' said Samirul. 'But the proposed (new) capacity significantly exceeds current usage, raising questions about potential underutilisation.' He noted that the RM100 billion allocation for the airport and Tanjung Embang port must be matched with strong demand to be sustainable. Samirul also raised concerns over the RM6 billion hydrogen-powered Autonomous Rapid Transit (ART) system, citing its high infrastructure and maintenance costs. State assemblyman Violet Yong previously questioned the cost, saying: 'The state is paying a China firm to manufacture the vehicles for Sarawak, but that firm had stopped production for their China market due to cost factors as hydrogen fuel is extremely expensive to produce, as is the case all over the world.' The Sarawak Gas Roadmap 2030 may also fall short without significant foreign investment, according to industry analysts. 'In the end, the Sarawak Gas Roadmap's success depends on the appetite of potential foreign investors,' said one analyst. Although Sarawak is drawing heavily on oil and gas revenue and federal allocations, analysts say prudent project planning will be critical to securing long-term returns. The Sarawak government and its linked companies are currently funding the projects through a combination of oil and gas revenue, state reserves, and federal support. As of 2024, Petronas had channelled RM96 billion to Sarawak's coffers, while infrastructure and upstream investments have reached RM280 billion. Despite receiving a RM600 million special grant and RM5.9 billion in federal development funds, Sarawak spent only 54.43 per cent of its 12th Malaysia Plan allocation, below the national average.
