Thai energy stocks have outperformed the SET over the past one to three months, led by refiners as investors increasingly price in a higher-for-longer GRM cycle. Strong Singapore GRM, tight distillate markets, limited global refinery capacity additions, and earnings upgrades have driven sector re-rating. Concerns over higher Chinese fuel exports have been offset by continued product market tightness. Reports that Venezuela may leave OPEC support expectations of higher long-term crude supply, benefiting refiners but weighing on upstream producers. We continue to prefer refiners, with BCP (TP: Bt62) is our top pick, while PTT (TP: Bt47) offers defensive integrated exposure.
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Energy – Strong GRM offsets emerging supply risks
Strong GRM remains the key driver of refinery outperformance. Market attention has shifted toward refinery earnings rather than crude oil prices following strong 2Q26 earnings results. Singapore GRM in 3Q26TD of US$23.8/bbl remains near cyclical highs, supported by tight diesel and jet fuel markets, refinery disruptions across several regions, and limited net global capacity additions. We continue to see the market raising GRM assumptions and earnings forecasts, leading to target price upgrades across refining companies. This reflects growing confidence that refining margins are structurally stronger than previously expected, supporting sustained earnings upgrades through 2H26 and 2027.
China fuel exports are a risk but not yet a game changer. China recently relaxed restrictions on gasoline, diesel and jet fuel exports, leading to concerns that higher regional product supply could pressure Asian crack spreads. While increased Chinese exports may moderate refining margins from current elevated levels, investors remain relatively unconcerned as export volumes remain below China's full capability and regional middle-distillate balances remain tight. As a result, the market currently expects strong GRM to persist despite gradual normalization in Chinese exports.
Venezuela's potential OPEC exit is positive for refiners, negative for upstream. Reports that Venezuela is evaluating a departure from OPEC are unlikely to have a significant near-term impact on oil balances because Venezuela is effectively exempt from OPEC quotas and currently produces about 1.1-1.2mb/d. Nonetheless, we view this development as potentially weakening OPEC cohesion and increasing the likelihood of future production growth. Additional Venezuelan crude supply would likely pressure global oil prices over time, benefiting refiners through lower feedstock costs while weighing on upstream earnings.
Winners and losers from higher Venezuelan crude supply. TOP, SPRC, and BCP would be the primary beneficiaries of additional Venezuelan crude supply, as lower feedstock costs would support refinery profitability and enhance margin capture. OR could also benefit from stronger fuel demand and improved retail economics. In contrast, PTTEP faces the greatest downside risk from lower realized oil prices and weaker upstream profitability, although the impact is unlikely in the near term. PTT's integrated structure provides some offset, though sentiment could weaken if crude prices decline structurally. For petrochemical companies, additional Venezuelan crude supply would be modestly positive through lower feedstock costs, particularly for naphtha-based producers. However, the benefit is indirect and generally smaller than for complex refiners, as heavy crude yields less petrochemical feedstock and requires more intensive processing.
Sector view remains constructive. Beyond GRM strength, investor interest in the sector has been supported by positive earnings revisions, attractive valuations, strong dividend yields, and improving balance sheets across several energy companies. We continue to favor refiners over upstream producers, as refining earnings remain supported by favorable industry fundamentals while crude oil price risks appear increasingly skewed to the downside. BCP remains our top pick, supported not only by its strong refining business but also by its evolving earnings base and attractive dividend yield. We also favor PTT, whose integrated structure provides some downside protection, although sentiment could weaken if crude prices decline structurally.
Risk factors for the sector. Key risks include normalization of middle-distillate cracks, crude price volatility, export restrictions limiting margin capture, and weak petrochemical spreads for IRPC and TOP. ESG risks center on environmental impacts and the industry's ability to adapt to the energy transition.