We upgrade our outlook for the Thai energy sector, driven by a shift in the global oil market from supply abundance to supply security. While crude supply capacity remains adequate, persistent geopolitical risks in the Middle East and Russia-Ukraine continue to support oil prices and refining margins through tighter export logistics, shipping routes, and refining capacity availability. We therefore raise our Brent assumptions to US$90/bbl in 2026 and US$80/bbl in 2027. We remain constructive on the sector, particularly refiners, as strong GRM, earnings upgrades, attractive valuations, and healthy dividends support returns. BCP remains our top pick, while PTT offers resilient exposure across the energy value chain.
Research
Energy – Geopolitics supports oil prices and GRM
From supply abundance to supply security. We upgrade our outlook for the oil and refining sector in 2026-27, reflecting a reassessment of geopolitical risks and refining market fundamentals. While global oil production capacity remains sufficient to meet medium-term demand growth, persistent tensions in the Middle East and the Russia-Ukraine conflict have increased the importance of supply security, export infrastructure reliability, shipping routes, and refining system resilience. We believe these factors will continue to support a geopolitical premium in crude oil prices, keeping Brent above historical mid-cycle levels through 2027 despite the potential for a more balanced market. As a result, we raise our Brent forecast to US$90/bbl in 2026 and US$80/bbl in 2027.
Refining fundamentals remain more attractive than crude fundamentals. We are more constructive on refining than upstream oil, as refining margins are supported by stronger structural fundamentals. Repeated disruptions at Russian refineries, periodic outages across the Middle East and Asia, and resilient demand for diesel and jet fuel continue to tighten global product markets. At the same time, refining capacity additions are unlikely to fully offset this tightness over the next 12-18 months. We therefore expect Singapore GRM to remain above historical averages through 2027, supporting earnings for complex refiners with strong middle-distillate exposure.
Earnings outlook remains favorable. Thai energy companies delivered strong 2Q26 results, with sector core earnings rising 318% YoY, supported by stronger upstream and refining performance. Looking ahead, we expect earnings to remain healthy through 2H26F despite some seasonal moderation in refining margins and planned gas facility maintenance in 3Q26F. Earnings momentum should improve again in 4Q26F, supported by healthy refining conditions, favorable oil prices, and tighter product markets. Our forecasts remain above consensus across most companies, reflecting our more positive assumptions for both crude oil prices and refining margins.
Prefer refiners; BCP remains top pick. We continue to favor refiners over upstream producers, as refining earnings remain supported by favorable industry fundamentals while oil price risks appear increasingly asymmetric. BCP remains our top pick because of its unique exposure to both upstream production and refining, supported by attractive valuation and dividend yield. We also upgrade TOP and SPRC to OUTPERFORM, as both offer strong leverage to sustained refining strength and continued tightness in middle-distillate markets. PTT remains our preferred defensive exposure, benefiting from its diversified business portfolio and broad participation across the energy value chain.
Key risks. The main downside risk to our outlook is a meaningful de-escalation of geopolitical tensions, which could reduce the risk premium currently embedded in crude oil prices and refining margins. Additional risks include weaker-than-expected global oil demand, faster OPEC+ supply growth, accelerated refining capacity additions, and continued weakness in petrochemical markets. Nevertheless, under our base-case scenario, we expect oil prices and refining margins to remain above historical averages, supporting sector earnings and shareholder returns through 2027.