Kuala lumpur: The recent fluctuation in oil prices has highlighted a subtle yet significant vulnerability in Malaysia's energy sector, notwithstanding its status as a net energy exporter, according to Kenanga Investment Bank Bhd (Kenanga IB).
According to BERNAMA News Agency, Kenanga IB's research indicates that Malaysia's fiscal health is closely tied to refined product prices due to subsidies. Although the nation shows a deficit in crude oil, it enjoys a surplus in liquefied natural gas (LNG), which contributes positively to its energy balance. In 2025, Malaysia recorded a RM30.4 billion deficit in crude and condensate while maintaining only a RM3.2 billion surplus in refined products, leading to a combined petroleum deficit of RM27.2 billion. However, an LNG surplus of RM45.4 billion resulted in an overall oil and gas surplus of RM18.2 billion.
The bank's analysis reveals that fuel subsidies are influenced by refined product prices, whereas LNG revenues follow a different fiscal timeline and are delayed. Consequently, elevated oil prices offer less budgetary protection than the overall energy export position might suggest.
According to estimates by the Ministry of Finance (MoF), each US$1 per barrel increase in oil prices boosts federal petroleum revenue by RM300 million annually, excluding dividends from Petronas. However, Kenanga IB estimates that the annual increase could be approximately RM1.05 billion for each US$1/bbl change.
Kenanga IB further explained that Malaysia's fiscal exposure is exacerbated by relatively low subsidy "strike" levels, with the RON95 subsidy strike at around US$44/bbl Brent and the diesel strike at about US$48/bbl. These figures fall short of Kenanga IB's US$80/bbl average house-view for 2026, indicating persistent exposure even in the absence of another significant oil shock.
The bank acknowledged that targeted subsidy measures have alleviated some fiscal pressure. Initiatives like BUDI95 and BUDI Diesel are estimated to generate annual savings of RM2.5 billion to RM4.0 billion, and RM2.0 billion, respectively, from July onwards. Collectively, these measures could save RM4.5 billion to RM6.0 billion annually, with the Ministry of Finance framing these savings as opportunities for reinvestment in education, healthcare, and public transport infrastructure.