KUALA LUMPUR (April 3): Several energy companies on Bursa Malaysia were actively traded on Monday (April 3), after the Organization of the Petroleum Exporting Countries and its allies (Opec+) unexpectedly cut supply further to stabilise oil markets.

Bursa's Energy Index, which tracks share prices of oil and gas-related companies, opened 20.69 points higher at 857.50, from last Friday’s close at 836.81 points. 

At the time of writing on Monday, Velesto Energy Bhd had risen 2.38% or half a sen to 22 sen a share, Hibiscus Petroleum Bhd gained 8.08% or eight sen to RM1.07, Reach Energy Bhd was up 7% or half a sen at 7.5 sen, Perdana Petroleum Bhd added 8.11% or 1.5 sen to 20 sen, KNM Group Bhd rose 22.22% or one sen to 5.5 sen, and Sapura Energy Bhd was up 14.29% or half a sen at four sen. 

MIDF Research noted that the unexpected supply cut was voluntary, as many Opec+ countries are facing divestments, consequently lacking the capacity for their production.  

“Additionally, crude oil supply is expected to remain tight with the continuous Russian sanctions, slow inventories in the US, and uncertainty in demand from Europe and China,” it said in a note on Monday.

At the time of writing, Brent crude oil had added about 7% to US$86 per barrel, consequent to the supply cut announcement, according to MIDF. 

“While higher oil prices will be a possible headwind for the midstream’s refineries and the downstream in relation to sales of refined products, it bodes well for the upstream in terms of exploration and production activities. 

“In consideration that Malaysia has over 1,300 oil and gas services and equipment companies, we believe the upstream will be a major beneficiary of the increase in crude oil prices in the near term,” it said. 

MIDF’s top pick is Dialog Group Bhd, with a “buy” call and a target price (TP) of RM3.28. 

Meanwhile, Kenanga Research maintained its “neutral” call for the oil and gas sector, and its average Brent crude oil price assumption of US$80 per barrel in calendar year 2023. 

“Oil prices are likely to be capped over the immediate term amid a supply overhang (as selective Asian markets are well fed with Russian crude exports rerouted from its traditional European market),” it said. 

Among its preferred stocks are Bumi Armada Bhd, with an “outperform” call and a TP of 75 sen, Wah Seong Corp Bhd ("outperform"; TP: 97 sen), Dialog ("outperform"; TP: RM3.10), and Yinson Holdings Bhd ("outperform"; TP: RM3.65).