In a research note today, the brokerage firm added that increased sanctions on Russia, coupled with capacity constraints among the Organisation of the Petroleum Exporting Countries (Opec) and its allies, may lead to insufficient oil supplies.

Meanwhile, Kenanga pointed out that Petronas had almost doubled its annual capital expenditure (capex) guidance from last year’s RM30.5 billion to upwards of RM60 billion, from the RM40 billion-RM50 billion level previously.

This is to prepare for a forecasted rise in demand due to a resumption of activities.

“Petronas’ net-cash position is currently at a three-year high of RM90.6 billion, with dividend commitments remaining flat at RM25 billion despite the better earnings outlook. Hence, we see little obstacles in Petronas meeting its own capex guidance,” the brokerage said in its note.

Globally, offshore exploration and production capex is also expected to pick up, after experiencing under-investment over the past several years, and may even surpass pre-Covid-19 levels.

“Given the largely suppressed earnings effect of the locally listed oil and gas players, dominated by domestic equipment and service providers, we have yet to see any meaningful or sustainable rally within the sector, except for those with high earnings correlation to oil prices,” it said.

The brokerage firm said Bursa Malaysia’s Energy Index is still trading at a forward price-to-earnings ratio valuation close to its trough seen during the peak lockdowns in the first half of 2020.

“We believe this signals some selective laggard opportunities within the sector,” it said.

Kenanga maintained its ‘overweight’ call on the sector. Stock picks include Petronas Chemicals, a prime beneficiary of continued elevated oil prices, and Dayang Enterprise, premised on the recovery of local activity levels.