Costlier second shock likely as oil buffer shrinks

Analysts warn Malaysia faces a more expensive energy shock if another disruption occurs later this year. According to Jamil Ghani, the first disruption was mitigated by drawing on existing oil stocks, but that buffer has diminished. Global oil inventories have fallen by about 410 million barrels since the war began. If another disruption coincides with colder weather and higher demand, prices could rise sharply due to fewer reserves available to cushion the impact.

China's strategic oil reserves are not depleted, but the pressure begins before they are exhausted. As countries reduce their reliance on stored supplies, they must purchase more current supply, creating additional demand. This dual pressure from reduced reserve capacity and increased market competition could lead to another shock.

Petronas, Malaysia's national oil company, has already allocated more resources to protect the country's energy supply in the second half of the year. However, its higher operating costs, including cash tied up in investments and working capital, mean that higher oil prices should not be seen as a windfall. Analysts caution that Malaysia should consider more than just Petronas's profit when evaluating its preparedness for future energy disruptions.