Thailand’s energy and petrochemical sectors face an uneven outlook heading into 2026, according to CLSA. While low oil prices will help cushion downside risk, sector performance will be divided. Refining is set to be a bright spot, but ongoing pressure on petrochemicals is likely to persist, with much of the sector’s downturn already reflected in current stock valuations.
Oil Market: Short-Term Pressures, Long-Term Uncertainties
CLSA noted that the US taking control of Venezuela’s vast oil reserves introduces concerns about additional supply, potentially suppressing oil prices in the short term. However, Venezuela’s peak production will not bounce back quickly. Years of infrastructure refurbishment are needed to approach the 3.0 million barrels per day (mbpd) levels of the late ’90s, compared to just 1.0 mbpd in October 2025.
Lower-for-longer oil prices may dampen US investor enthusiasm, while non-OPEC+ production looks set to outpace global demand in 2026. OPEC+ pausing its production unwind in the first quarter of 2026 should give temporary support to prices. CLSA maintains a Brent crude assumption of $70/bbl for the year, with Dubai crude expected at a $2 discount.
Refining: Resilience Amid Limited New Supply
Refining emerges as a sector bright spot, buoyed by limited new capacity after 2025. Global trends—especially the rise of artificial intelligence delaying peak oil demand, now forecast by the IEA for 2050 instead of 2030—support a healthy refining margin (GRM) outlook. While long-term structural shifts like renewables, EVs, and energy efficiency will impact demand, their full effects remain years away.
Petrochemicals: Trough Priced In, Weakness Persists
Petrochemicals remain the weakest cyclical segment, with product spreads below cash costs for naphtha-based producers. New supply continues to outpace demand growth, with 3.8 million tons (mt) of new HDPE capacity expected in 2026, rising to 6.6 mt in 2027. This will likely keep spreads low and delay any sector recovery. Share prices have already factored in much of the downturn.
Stock Picks: PTTEP Resilient, TOP Upgraded
Among Thai corporates, PTTEP (TP 146 Baht) is positioned to deliver the most resilient earnings, underpinned by 3-9% annual volume growth from 2026-2029. Additional upside may stem from its 10% stake in Malaysia’s SK408 acquired recently.
PTTGC (TP 23 Baht) faces pressure from an extended refinery shutdown, stock losses, and a potential impairment charge in late 2025. CLSA prefers SCC (TP 250 Baht) and IVL (TP 24 Baht) for their stronger balance sheets. The house has upgraded Thai Oil (TOP) to “Hold” and raised its target price to Bt36 (from Bt25), citing improved refining margin prospects and supportive oil prices. Still, risks remain from potential project delays and strategic partner dilution.
