Hong Leong Investment Bank (HLIB) Research has raised its 2026 Brent crude oil price assumption to US$90 per barrel from US$80 previously, warning that prices could revisit US$120 per barrel if disruptions across key Middle East energy routes deepen.
HLIB said Brent moved back above US$100 per barrel on Sept 10 as escalating geopolitical tensions raised concerns over simultaneous disruptions at the Strait of Hormuz and Bab-el-Mandeb, alongside attacks on regional energy infrastructure.
The research house said several of the upside-risk scenarios it previously identified are now beginning to materialise, particularly severe disruption to Strait of Hormuz traffic, rising threats in Bab-el-Mandeb and attacks on alternative energy infrastructure.
Saudi Arabia’s 1,200km East-West crude pipeline, an important route that allows oil exports to bypass the Strait of Hormuz, was temporarily shut following drone attacks reportedly launched from Iraq.
The pipeline has total capacity of about 7 million barrels per day, comprising 5 million barrels per day available for exports and 2 million barrels per day serving domestic refineries.
HLIB said exports through Yanbu had fallen to a six-month low of 1.43 million barrels per day, compared with 3.9 million barrels per day during the preceding three months.
At the same time, traffic through the Strait of Hormuz had fallen to below 10% of pre-war levels between July and September 2026, further tightening physical supply conditions.
HLIB said China’s crude oil imports are also showing signs of recovery, creating another potential source of upside pressure on prices.
China imported 578 million tonnes of crude in 2025, averaging 48.2 million tonnes per month. Imports subsequently fell sharply to 29.3 million tonnes in June 2026, around 39% below the 2025 monthly average, following disruptions to Gulf shipping.
However, imports rebounded 22% month-on-month in July and another 6% in August to 37.9 million tonnes.
HLIB believes China has increasingly adapted to the disruption by diversifying its crude sources.
Citing Kpler data, the research house said China’s seaborne crude purchases from Russia increased to 1.68 million barrels per day in August from 1.40 million barrels per day in July.
Meanwhile, the US Energy Information Administration expects China’s oil consumption to rebound to 16.4 million barrels per day in September, up 7.6% month-on-month.
HLIB said evidence of physical supply tightness is becoming more pronounced.
The global oil deficit widened to around 4.1 million barrels per day in August from just 0.1 million barrels per day in July, and is expected to widen further to about 4.8 million barrels per day in September.
The deterioration was driven mainly by Middle East supply disruptions, with regional production falling 7.8% month-on-month, partly offset by higher output from Kazakhstan and the United States.
Middle East crude production shut-ins also increased to 6.7 million barrels per day in August from 5.0 million barrels per day in July, reflecting persistent export constraints and damage to energy infrastructure.
HLIB expects Brent to remain elevated in the fourth quarter, with prices potentially settling around US$95-US$100 per barrel towards end-2026.
Brent has averaged US$87.60 per barrel year-to-date.
The research house maintained its US$75 per barrel assumption for 2027, while noting that the upcoming US midterm elections could add further volatility to energy markets.
HLIB maintained its OVERWEIGHT recommendation on the oil and gas sector, while remaining selective on companies with earnings drivers that can extend beyond near-term oil-price volatility.
Its top pick remains Dialog Group Bhd, with a BUY call and target price of RM2.49.
HLIB expects Dialog’s FY2027-FY2028 earnings to be supported by growth across its upstream, downstream and storage businesses.
The research house expects the Cendramas production sharing contract and Baram Junior Cluster, both commencing from 2QFY27, to lift the upstream contribution to about 30%-40% of earnings.
HLIB also incorporated the new Cendramas PSC and the 614,000 cubic metre PT5 storage expansion for BP Singapore into its forecasts, with contributions expected from 2HFY28.
HLIB maintained BUY on Petronas Chemicals Group Bhd (PCHEM) with a target price of RM5.49, noting early signs of stabilisation in key product prices.
The research house said elevated Brent prices could support stronger average selling prices in 4QFY26, while utilisation rates should improve as major turnaround activities ease.
HLIB also turned more positive on Dayang Enterprise Holdings Bhd, maintaining a BUY call with a target price of RM2.20.
The research house views Dayang as a potential beneficiary of a recovery in Petronas upstream capital expenditure in 2027.
Petronas upstream spending stood at around RM21.5 billion across 2023 and 2024 but remained subdued at about RM9 billion in 1HFY26.
HLIB said Petronas’ capital expenditure has historically moved with Brent prices with a lag, suggesting the recent strength in crude could translate into stronger upstream spending from the first half of 2027, with a more visible earnings impact for Dayang in 2HFY27.
HLIB also expects improving offshore support vessel activity to support names such as Dayang, Keyfield International and Perdana Petroleum, while stronger oil and gas services order flows and longer-term investment in storage, pipelines and energy infrastructure should continue to benefit Dialog and Wasco.
