The Thai oil and gas sector has underperformed the broader market in the past month, with share prices down 1.2% on average compared to the SET’s 4.1% gain and SETENERG’s 1.9% rise. The disappointing performance is largely attributed to weaker earnings expectations for the second quarter of 2026, driven by lower oil prices and the risk of inventory losses. However, InnovestX Securities maintains a constructive stance on integrated oil and retail plays, singling out PTT, BCP, and OR as top picks.
Oil prices have remained volatile but largely range-bound, with Brent crude averaging US$94.8 per barrel year-to-date, supporting exploration and production (E&P) earnings. While gross refining margins (GRM) have surged, higher crude premiums and shipping costs have limited the benefit for refiners, who have also faced inventory losses and government-mandated price cuts. In contrast, oil retailers have been more resilient, with marketing margins up by 27% quarter-on-quarter.
A strong rebound in oil prices during the first quarter of 2026, triggered by Middle East tensions and disruptions to supply through the Strait of Hormuz, led to a 300% year-on-year and quarter-on-quarter jump in sector earnings. A substantial Bt74 billion inventory gain was only partially offset by hedging losses related to price and crack spread volatility. Analysts believe that not all gains were reflected in Q1 earnings, suggesting potential further upside for E&P profits in the second quarter.
Despite robust GRM, refiners are constrained by increased input and freight costs, and rapid price swings have heightened earnings uncertainty, leading to potential inventory losses. Refiners also face pressures from policy-driven ex-refinery price cuts, which have shaved about US$8 per barrel from their operating GRM.
Looking ahead, InnovestX expects oil prices to remain capped in a US$90–100 per barrel range, absent any major geopolitical escalation, with upside risk linked to extended Middle East disruptions and downside risk tied to weakening demand and policy de-escalation. Integrated oil and retail players are preferred given their resilience in the current market context. Key stocks to watch are PTT, BCP, and OR, with target prices of Bt44, Bt40, and Bt18, respectively.
