KUALA LUMPUR (Feb 2): Malaysian oil and gas (O&G) stocks were among the most active in the Friday morning session, as investors assessed Saudi Arabia's decision to axe production capacity expansion on rates for Southeast Asian service providers and as oil prices fell below the US$80 (RM378.36) per barrel mark.

Rig operator Velesto Energy Bhd, which has gained as much as 29% since December, was the second most active counter with 70.61 million shares traded. The counter fell three sen or 11.54% to 23 sen in early trading before erasing all losses to trade unchanged at 26 sen at the time of writing.

Investors turned to profit-taking on news of Saudi Arabia's backtracking, as O&G stocks have rallied since December, tracking a rebound in oil prices in the period as the market shrugged off concerns of economic slowdown in markets like the US and China.  

Other active counters in the sector include offshore support vessel (OSV) player Perdana Petroleum Bhd, which saw 26.13 million shares traded, with the stock down half a sen or 1.89% to 26 sen. The counter is still up 30% this year.

Floating production storage offloading vessel operator Bumi Armada Bhd fell 1.5 sen or 2.68% to 54.5 sen, with 13.25 million shares changing hands.

Maintenance service provider Dayang Enterprise Holdings Bhd saw 12.23 million shares traded, as the counter traded unchanged at RM2.05 after retreating as much as four sen earlier. It is still up 28% since the start of the year.

Among top decliners in the sector are equipment manufacturer Wasco Bhd (down seven sen or 5.61% to RM1.18), as well as service providers Carimin Petroleum Bhd (down 5.5 sen or 5.45% to 95.5 sen), Uzma Bhd (down five sen or 4.24% to RM1.13) and Petra Energy Bhd (down four sen or 3.85% to RM1).

O&G producer Hibiscus Petroleum Bhd also traded down six sen or 2.27% at RM2.59 at the time of writing.

The declines dragged the Bursa Energy Index down 1.4% from its three-month peak of 895.1 points on the last day of January, although the O&G stocks benchmark is still up 13% from its trough in December last year.

The sell-off follows a recent decision by the Saudi Arabian government for Saudi Aramco to refrain from increasing its maximum sustainable capacity (MSC) of crude oil production from 12 million barrels per day (mbpd) to 13 mbpd by 2027.

This marks a U-turn by the country's Ministry of Energy, which four years ago in March 2020 instructed its state-owned O&G entity Saudi Aramco to raise its MSC to 13 mbpd.

Meanwhile, crude oil prices also tilted to the downside after hitting its three-month high recently, with Brent trading at US$78.58 per barrel at the time of writing.

A post-Covid boom in O&G activities in the Middle East has lifted overall demand for service providers and resulted in spillover effect of higher charter rates previously.

The pivot means that companies in Southeast Asia such as drillers are at at risk of potential daily charter rate moderation, CGS-CIMB said in a note on Wednesday (Jan 31).

The research house flagged Velesto as one of the players that may be affected, although the it maintained its "add" recommendation on Velesto with a target price of 27.5 sen.

Several players bucked the trend, namely Deleum Bhd (up three sen or 2.7% at RM1.14) and T7 Global Bhd (up half a sen or 1.09% at 46 sen).

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