KGI wrote in its analysis about the energy sector, cautioning investors to avoid refinery stocks in the near term due to uncertainty in the government measures to impose ceiling and floor on refining margins.
As of 14:39 local time in Bangkok on Friday, the share price of Bangchak Corporation Public Company Limited (SET: BCP) fell 4.52% to THB 37.00 per share. Meanwhile, Star Petroleum Refining Public Company Limited (SET: SPRC) dropped 4.38% to THB 6.55 per share and Thai Oil Public Company Limited (SET: TOP) decreased 3.80% to THB 44.25 per share.
On April 2, the new Minister of Energy stated that the government has the authority to set ex-refinery oil prices under the Emergency Decree on the Prevention and Correction of Fuel Shortage B.E. 2516 (1973), which grants broad powers to regulate the oil sector in emergency situations.
KGI has a negative view on the refinery sector if the government proceeds with intervention to cap ex-refinery oil prices, as this would likely put significant downward pressure on refining margins, currently elevated due to the ongoing Middle East conflict. Diesel spreads surged by 172% MOM to US$58.4/bbl in March (from US$21.5/bbl). However, the proposed policy to impose a ceiling and floor on refining margins during crisis periods remains uncertain in both structure and duration.
KGI therefore recommends closely monitoring developments and, in the near term, avoiding refinery stocks, including SPRC, TOP, and BCP.
