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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
03-05-2025
- Business
- New Straits Times
Petronas Carigali-Sarawak legal dispute may affect partners, contractors
KUALA LUMPUR: Petronas Carigali Sdn Bhd's legal dispute with Sarawak goverment may have cascading effects on partners, contractors and companies dependent on Petroliam Nasional Bhd-operated infrastructure or feedstock there, said analysts. They named Petronas Gas Bhd, Petronas Chemicals Group Bhd, Hibiscus Petroleum Bhd, Dialog Group Bhd and Sapura Energy Bhd as among those that may be affected. Sarawak's utility and telecommunications ministry had on May 1 issued a letter of demand to Petronas Carigali over alleged unauthorised operations at the Miri Crude Oil Terminal (MCOT). The allegation is based on non-compliance with Section 7(e) of the Distribution of Gas Ordinance (DGO) 2016, which regulates construction and operation of gas infrastructure in Sarawak. Petronas on Friday confirmed receiving the notices. The national oil company, however, said its upstream arm Petronas Carigali is operating in accordance with the Petroleum Development Act 1974 (PDA 1974). The Act provides statutory authority for the company to carry out petroleum-related operations nationwide, subject to legal compliance. "While we respect the aspirations of the state of Sarawak, Petronas also has a duty to uphold the PDA 1974 and safeguard national interests," it said in a statement. Petronas said it remains committed to constructive engagement and will continue working closely with both the federal and Sarawak state governments. This includes collaboration with Sarawak's state-owned oil and gas firm, Petroleum Sarawak Bhd (Petros), to explore future arrangements that ensure regulatory clarity and operational continuity. "We are also committed to ensuring that the rights and interests of all parties, including end-consumers and investors, are addressed accordingly," it said. Political economic and international relations analyst Samirul Ariff Othman said uncertainty over infrastructure ownership, licensing and compliance in Sarawak will ripple across the industry. "Publicly listed companies involved in gas infrastructure, liquefied natural gas (LNG) and upstream activities in Sarawak will need to monitor the situation closely," he told the Business Times. BMI senior oil and gas analyst San Naing exopect the uncertainty will have a freezing effect on new investments in Sarawak, at least in the near term. Naing said Shell and ConocoPhilips, which operate large-scale projects in Sarawak are likely to be affected by the legal dispute. "ConocoPhilips has reportedly divested from one of the offshore deepwater projects recently. PTT Exploration and Production Public Co Ltd (PTTEP) has already postponed the final investment decision for investment in the Lang Lebah gas project. "It remains uncertain PTTEP's operator of the Lang Lebah natural gas and carbon capture and storage (CCS) project will materialise soon. Further delays to the project will adversely affect LNG production ambitions by PTTEP and Petronas," Naing added. According to Samirul, the potential ramifications for Petronas are significant. Sarawak holds over 60 per cent of Malaysia's total gas reserves and 40 per cent of its oil, including vital fields in the Central Luconia and Bintulu offshore basins. He said these provide feedstock to the Bintulu LNG Complex - a key export revenue generator - and to domestic industrial gas users. "Disruptions to gas licensing or terminal access, as is possible with MCOT, could delay LNG exports, raise compliance costs, and reduce overall revenue certainty," Samirul added. Meanwhile, Naing expects Petronas's strategic priorities and investment plans to focus more on resources in the shallow waters of Peninsular Malaysia and Sabah. "Petronas is still able to manage oil and gas blocks in Sabah, but this may change in the future if the Sabah state government follows Sarawak's lead," he said. "Moving forward, maintaining an amicable relationship with the Sabah government remains critical for Petronas in managing the hydrocarbon resources there," he added. In a separate statement, Bersatu's youth wing Armada dismissed the Sarawak government's claim that Petronas Carigali is operating illegally at MCOT. Armada called the accusation baseless and inconsistent with existing laws. It said the PDA 1974 act clearly grants Petronas exclusive rights to regulate all petroleum-related activities across Malaysia. "Based on this legal foundation, Petronas does not require any licence or permit from the Sarawak government to conduct its petroleum operations in the state," it said. Armad reminded the public that in 1976, the Sarawak government had signed a formal agreement with the federal government, transferring ownership and control of its petroleum resources to Petronas. "Any claims that Petronas is operating illegally in Sarawak are clearly unfounded and contradict legal facts," it added.
New Straits Times
28-04-2025
- Business
- New Straits Times
Unplugging America: Trump, the WTO, and the End of Globalization
Samirul Ariff Othman The return of Donald Trump to the White House in 2025 didn't just reset the clock — it accelerated a geopolitical rupture that had been brewing since his first term. To understand how we got here — to a fractured global economy, a paralysed World Trade Organisation (WTO) and the hardening fault lines of US–China decoupling — we need to go back to the original cracks that Trump so forcefully exposed. His disdain for the WTO wasn't some arcane gripe about trade law or bureaucratic overreach. It was about something deeper: unplugging America from the global manufacturing grid it helped build after World War II — a grid that connected Penang to Pittsburgh, Detroit to Dongguan. That grid, in Trump's eyes, had turned into a trap — empowering rivals, weakening the U.S. industrial base and outsourcing economic sovereignty to Geneva. At the core of that multilateral trading system lies a deceptively elegant idea: Most-Favoured Nation (MFN). It's the glue of global trade — if you offer one country a favorable term, you must offer the same to all. Designed to prevent discrimination and trade wars, MFN was the invisible infrastructure behind the predictability and stability of postwar trade. But it also tied America's hands. It made it difficult to reward allies, punish rule-breakers, or strike bespoke trade deals outside WTO constraints. Trump hated it. He saw MFN not as a framework for fairness, but as a straitjacket — one that locked the U.S. into a world of symmetric obligations with asymmetric players, most notably China. In Trump's narrative, China wasn't just a competitor; it was a chronic abuser of the global trade regime. The Chinese Communist Party had masterfully played the WTO system — subsidising industries, sheltering state-owned enterprises, hoarding IP, and still insisting on its status as a "developing country," a label that opened the door to special exemptions, leniencies and aid. That label might have made sense in 2001 when China joined the WTO, but by 2025, it had the world's second-largest GDP, its largest manufacturing base, and the geopolitical heft of a superpower. Trump wasn't having it. In 2019, he signed a memo telling US negotiators to stop treating China as "developing." To him, that wasn't legal nitpicking — it was about fairness. If China wanted to play in the big leagues, it had to play by big-league rules. And let's not forget the geopolitical jiu-jitsu China pulled with its WTO accession in 2001. That wasn't just economic liberalisation — it was a strategic coup. China used the WTO to hardwire itself into global markets, draw in foreign direct investment, and gain legitimacy. It promised structural reforms and delivered just enough of them to satisfy early doubters. The result? In less than two decades, China became the world's factory and the global supply chain was redrawn around it. American and European multinationals reoriented production to the Pearl River Delta. Even more striking was the collateral damage this caused in countries like Malaysia. Once hailed as a promising industrial tiger, Malaysia was blindsided by China's speed, scale, and strategic subsidies. Its textile and plastics industries faded. Low-end electronics production vanished. What economists now call"premature deindustrialisation" hit hard — Malaysia was pushed into the service sector before it had fully matured as an industrial economy. Meanwhile, back in the US, the backlash was louder and more politically explosive. Entire towns in Ohio, Pennsylvania, and Michigan lost their factories — and their futures. The now-infamous "China Shock," documented by economists like David Autor and Gordon Hanson, estimated millions of manufacturing jobs lost to import competition. Trump channeled that rage and trade became his battlefield. His war wasn't just with China — it was with the WTO itself. Nowhere was that more evident than in his sabotage of the organization's enforcement arm, the Appellate Body. Beginning in 2017, the U.S. began blocking appointments. By 2019, the system ground to a halt. No judges, no appeals, no enforcement. In Trump's view, the WTO had become a rogue court — ruling against US tariffs, second-guessing American trade remedies, and stepping far beyond its legal mandate. So did America leave the WTO? Technically, no. But functionally, it hollowed it out. Under Trump, the US began ignoring adverse rulings, slapping tariffs without waiting for legal cover, and negotiating trade deals outside the WTO system. The rules-based order became a suggestion — and a selective one at that. For Trump, Geneva was no longer a global commons; it was a liability. And if decoupling from China required breaking the system that facilitated its rise, so be it. Which brings us to now — what might be called the Age of Decoupling. This isn't just a rearrangement of shipping routes or the birth of "friendshoring." It's a wholesale reordering of the global economic logic that underpinned globalisation. Trump's return has hardened Washington's techno-nationalism and deepened the strategic divorce from Beijing. The WTO, already weakened, now looks increasingly like a relic. Instead of shared rules, we are entering an era of strategic blocs — where the ability to set standards and control chokepoints is the new currency of power. For countries like Malaysia, this is no longer just an economic challenge — it's a strategic crucible. The old playbook of export-led growth, free trade agreements and multilateral arbitration is no longer sufficient. Navigating between America's defensive techno-industrialism and China's production-heavy assertiveness will only grow more perilous. The WTO, once a stabilizing buffer, has lost its teeth. Trade diplomacy is now shaped by realpolitik. Industrial strategy must be recalibrated for resilience, not just efficiency. That means investing in technological autonomy, building diversified trade corridors and strengthening regional alliances. That includes leveraging ASEAN's strategic centrality and deepening commitments through frameworks like the Regional Comprehensive Economic Partnership (RCEP), which may serve as a hedge against great-power fragmentation. While these alternatives lack the enforcement muscle of the WTO, they offer a platform for mid-sized economies like Malaysia to remain economically relevant, shape standards and buffer against the volatility of a bloc-based world. Because in this new era, countries like Malaysia are not just competing for investment. They're competing for relevance in a global economy where rules are fluid, alliances are shifting and power is transactional. The question is no longer how to climb the value chain. It's how to stay plugged into a global grid that is being rewired — and to do so on your own terms, before someone else writes you out of it entirely. —————————————————————— Economist Samirul Ariff Othman is an adjunct lecturer at Universiti Teknologi Consulting. The views in this OpEd piece are entirely his own.
