MIDF said in a note today that it believed that once the renewed US energy policy is fully implemented, Malaysian oil and gas services and equipment companies could exploit the increased demand for exploration solutions and fuel transportation.
It said the deregulation could also open new investment opportunities for Malaysia to penetrate the North American energy sector, consequently increasing the potential for collaboration and trade.
“However, uncertainties remain on the long-term impact of the increasing US oil production, the environmental impact of unregulated exploration, and lower reliance on energy transition and supply chain disruptions from the US boosting its domestic manufacturing,” it added.
It was reported that newly elected US president Donald Trump had come up with executive orders to address the US energy issues, including slower oil production and high energy prices.
“These orders prioritised the increased exploration and production of conventional fossil fuels, the increased tariffs on trade, and the deregulation of climate and environmental policies,” said MIDF.
The investment bank said in the scenario that US production is to increase, similarly during Trump’s first presidency (about 7% higher than during Barack Obama’s administration), crude oil prices could decline due to greater supply, potentially lowering energy prices in the US.
“By reducing regulations, we expect that major oil players could lower their operational costs, consequently boosting profitability and economic growth.
“The higher US production would also reduce the US reliance on foreign oil, notably from Canada, while enhancing its energy security,” it said.
Despite the lower crude prices, MIDF opined that two major factors could control Brent crude oil into a rangebound of US$70-US$80 (RM307.92 – RM351.91) per barrel, including the US Federal Reserve’s monetary policy and the Organization of the Petroleum Exporting Countries Plus’ ongoing supply cuts.
“Geopolitical tensions in the Middle East and Eastern Europe – while still crucial – had a smaller impact on the movement of oil prices, particularly when the recent announcement of a Russian oil sanction had failed to keep the prices above US$80 (RM351.91) per barrel for long,” it said.