KUALA LUMPUR (May 17): Shares of refiners Petron Malaysia Refining & Marketing Bhd and Hengyuan Refining Co Bhd rose to their three-year highs, adding to gains since mid-April on expectations of high refining margins.  

At noon market break, Petron Malaysia shares were up 42 sen or 6.98% to RM6.44. Meanwhile, Hengyuan shares paused up 36 sen or 5.16% at RM7.34, having touched RM7.40 earlier.

Both counters, which were among the top gainers on Bursa Malaysia, saw trading volume near triple their two-month averages. Petron Malaysia shares have risen 47% this year, while Hengyuan shares have climbed 89.9%.

HLIB Research in a note said “refining margins are at an all-time high territory”, pointing to Singapore Mogas 92 Brent Crack Spread of US$28/bbl which is way higher than its 2017 peak of US$17-18/bbl.

“Our findings have led us to believe that the surge in refining product margins is a lingering problem arising from structural issues: surge in demand post-pandemic, supply shortage due to years of underinvestment and ESG-related pressures, and sanctions on Russian oil — all of which would not be able to be addressed in the immediate term,” it said.

“We highlight that there stand to be trading opportunities in local names such as Hengyuan and Petron Malaysia (both non-rated) for their downstream refining business exposure,” the research house said.

“However, we would like to highlight that refineries typically take on progressive hedging positions (forward sales) and due to the lack of access, we are unsure of the spot/hedge portion for both Hengyuan and Petron Malaysia,” it added.

With Brent crude oil price still hovering at US$113/bbl at the time of writing, Malaysia’s oil and gas-linked counters continued to see active trading.

The Bursa Malaysia Energy Index was the biggest gainer at noon break, rising 7.04%. This was supported by gains in Sapura Energy Bhd (up 3.5 sen or 77.78% to eight sen), Hibiscus Petroleum Bhd (up 11 sen or 8.15% to RM1.46), and Bumi Armada Bhd (up 1.5 sen or 3.75% to 41.5 sen).

Meanwhile, storage tank operator Dialog Group Bhd settled down one sen or 0.44% to its four-year low of RM2.29, whereas Petronas Dagangan Bhd shares slid two sen or 0.09% to RM21.48.