RHB Maintains Bullish Outlook on Malaysia’s Oil and Gas Sector

RHB Investment Bank has maintained an OVERWEIGHT rating on Malaysia’s oil and gas (O&G) sector, citing robust growth in upstream investments from PETRONAS and a strong performance during the latest quarterly earnings season.

According to the original publisher, PETRONAS demonstrated its commitment to industry expansion by increasing its upstream capital expenditure by 19% year-on-year to RM8.7 billion during the first half of the year. This capital injection has acted as a primary catalyst for firms within the Oil and Gas Services and Equipment (OGSE) sector, providing a steady pipeline of work for service providers.

The report highlights that major industry players have largely navigated the current economic environment successfully, with a positive trend in quarterly earnings. This performance supports the investment bank’s bullish stance, suggesting that the sector remains resilient despite fluctuating global market conditions.

For the Malaysian OGSE sector, this sustained spending is significant as it provides long-term operational clarity. Increased upstream activity typically correlates with higher demand for drilling services, offshore maintenance, and vessel support, which keeps a substantial portion of the local workforce employed in high-value technical roles.

For the average Malaysian, this news underscores the continued importance of the O&G sector to the national economy. With the country reporting a strong real GDP growth of 6.0% year-on-year in the latest quarter, the health of the energy sector remains a key contributor to this momentum. Furthermore, for investors and SMEs operating within the energy supply chain, the sustained upstream investment suggests a stable environment for potential contract renewals and expansion.

However, the ripple effect on household costs remains a complex issue. While the energy sector thrives, consumers are navigating a fuel landscape where RON95 is priced at RM1.99 for eligible recipients under the BUDI95 scheme, while the unsubsidised rate stands at RM4.57. Diesel prices, currently at RM5.42, serve as a reminder that upstream successes do not automatically translate to lower energy costs at the pump for the general public, as domestic prices remain tied to broader subsidy rationalisation policies.

This sector performance occurs against a backdrop of a stable labour market, with the latest unemployment rate recorded at 3.0%, or 520,300 people as of July 2026. The OGSE sector continues to play a vital role in maintaining this low unemployment figure by providing specialised jobs that support the broader macroeconomic stability of the country.

The national headline inflation rate of 1.9% year-on-year as of August 2026 suggests that the economy is currently managing inflationary pressures relatively well. The continued investment from PETRONAS serves as a hedge against potential volatility, keeping the industrial base active while the government balances fiscal adjustments like the fuel subsidy reforms implemented earlier this year.

What remains unconfirmed is how long this elevated level of capital expenditure will persist as global energy transition goals evolve. It is also not disclosed if subsequent phases of investment will maintain the same 19% growth trajectory, or if future budgets will shift significantly toward renewable energy projects, which could alter the long-term prospects for traditional OGSE service providers.