Malaysia’s Premium Crude Shields Economy From Oil Price Swings - RHB IB

KUALA LUMPUR, Sept 10 (Bernama) -- Malaysian crude grades continued to command significantly higher premiums over Dated Brent, a benchmark for physical crude oil prices, indicating that the country was able to partially cushion the impact of lower outright oil prices on revenues.

RHB Investment Bank Bhd (RHB IB) expects higher oil prices to have a limited adverse impact on Malaysia’s growth outlook and only a modest effect on consumer inflation, while providing some offsetting support through stronger energy-sector export performance.

“We forecast Brent crude price to decline to US$85 per barrel by end 2026, and US$75 per barrel by end 2027, on the assumption of a renewed de-escalation of geopolitical tensions,” the bank noted in its report, titled Malaysia: Strong Bastion Against Fluctuating Oil Prices. (US$1=RM4.06)

While falling Brent prices may weigh on export earnings and government petroleum revenues, savings from lower subsidies could effectively offset weaker oil-related revenues, it added.

RHB IB stressed that the recent widening of Malaysian crude oil differentials highlights the resilience of the country’s premium crude export portfolio amid a softer global oil price environment.

According to the bank, while Brent crude prices have fallen significantly from their West Asia conflict-driven highs, Malaysian grades such as Tapis, Kikeh, Kimanis, Cendor and Dulang have continued to command strong premiums due to their superior quality, favourable refining yields and limited availability.

As a result, Malaysia has been able to preserve a larger share of export value, partially offsetting the decline in benchmark oil prices and reinforcing the country’s long-standing strategy of exporting premium crude while importing lower-cost feedstock for domestic refining, RHB IB explained.

On the fiscal front, the bank’s sensitivity analysis suggests that every US$10 per barrel increase in Brent crude prices would raise government revenue by around RM6.5 billion.

This would be driven mainly by petroleum-related receipts, including royalties, petroleum income tax and export duties, which collectively account for approximately RM3.7 billion.

The bank added that the key assumption underpinning the increase in government revenue is potential additional upside from higher Petroliam Nasional Bhd (Petronas) dividends, although actual payouts will depend on the company’s operational performance and prevailing market conditions.

-- BERNAMA