Periodic/Sector reports
Oil & Gas: Fuel Price Reform: Impacts Should Be Manageable
MARKET WEIGHT (Maintained)
Analyst
Analyst
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Highlights
- Refinery stocks yesterday traded lower due to a new fuel price reform, effective on 29 Oct 26. However, we expect overall impact to be manageable.
- Additionally, the government is reducing the existing diesel price cut from Bt4.00 to Bt2.00 per litre, effective 1 to 30 November, which is better than our current assumption.
- Maintain MARKET WEIGHT. Our top picks are TOP and SCGP.
Analysis
- What’s new. Refinery stocks yesterday fell by 2-5% to reflect the change in the country’s fuel-pricing formula, effective on 29 Oct 26. The Energy Policy Administration Committee’s (EPAC) resolution is to remove various deemed-cost components, including freight, insurance, fuel loss during transportation and some reduction in legal oil reserves. Noted that Thai ex-refinery prices are calculated based on the import parity pricing mechanism, using Mean of Platts Singapore (MOPS) as the baseline. As a result, the previous formula was represented as MOPS + Premium (or deemed costs).
- Additionally, EPAC is reducing the existing diesel price cut from Bt4.00 to Bt2.00 per litre, effective 1 to 30 November.
- Our view. We expect the overall impact to be manageable. Based on our preliminary channel checks, the previous premium in the formula was around US$1.30/bbl-US$1.40/bbl, equivalent to around Bt0.20-0.30/litre and Thai refiners set the premium below US$1/bbl. In the worst-case scenario, if we assume the fuel price reform reduces our market GRM assumption by US$1/bbl in 2027, our earnings estimate for five refiners should be negatively affected in the range of 10-38% (Please see page 2 table).
- However, not all refined products (10%-20% production yield) from refineries will be hurt from the fuel price adjustment, including Naphtha (feedstocks for petrochem), Liquefied Petroleum Gas (LPG), and off-spec refined products. Hence, we believe refiners will be able to manage the impact from this reform.
- Meanwhile, the government is reducing the existing diesel price cut from Bt4.00 to Bt2.00 per litre, effective 1 to 30 November. The decrease in diesel price cut is better than our current assumption. Our earnings forecasts for refinery stocks have already incorporated the ex-refinery cut on diesel by Bt4.00/litre since 4Q26 towards 1H27.
Highlights
- Refinery stocks yesterday traded lower due to a new fuel price reform, effective on 29 Oct 26. However, we expect overall impact to be manageable.
- Additionally, the government is reducing the existing diesel price cut from Bt4.00 to Bt2.00 per litre, effective 1 to 30 November, which is better than our current assumption.
- Maintain MARKET WEIGHT. Our top picks are TOP and SCGP.
Analysis
- What’s new. Refinery stocks yesterday fell by 2-5% to reflect the change in the country’s fuel-pricing formula, effective on 29 Oct 26. The Energy Policy Administration Committee’s (EPAC) resolution is to remove various deemed-cost components, including freight, insurance, fuel loss during transportation and some reduction in legal oil reserves. Noted that Thai ex-refinery prices are calculated based on the import parity pricing mechanism, using Mean of Platts Singapore (MOPS) as the baseline. As a result, the previous formula was represented as MOPS + Premium (or deemed costs).
- Additionally, EPAC is reducing the existing diesel price cut from Bt4.00 to Bt2.00 per litre, effective 1 to 30 November.
- Our view. We expect the overall impact to be manageable. Based on our preliminary channel checks, the previous premium in the formula was around US$1.30/bbl-US$1.40/bbl, equivalent to around Bt0.20-0.30/litre and Thai refiners set the premium below US$1/bbl. In the worst-case scenario, if we assume the fuel price reform reduces our market GRM assumption by US$1/bbl in 2027, our earnings estimate for five refiners should be negatively affected in the range of 10-38% (Please see page 2 table).
- However, not all refined products (10%-20% production yield) from refineries will be hurt from the fuel price adjustment, including Naphtha (feedstocks for petrochem), Liquefied Petroleum Gas (LPG), and off-spec refined products. Hence, we believe refiners will be able to manage the impact from this reform.
- Meanwhile, the government is reducing the existing diesel price cut from Bt4.00 to Bt2.00 per litre, effective 1 to 30 November. The decrease in diesel price cut is better than our current assumption. Our earnings forecasts for refinery stocks have already incorporated the ex-refinery cut on diesel by Bt4.00/litre since 4Q26 towards 1H27.
MARKET WEIGHT (Maintained)
Analyst
Analyst
Analyst
IMPORTANT NOTICE - DISCLOSURES AND DISCLAIMERS
This report is provided subject to, and must be read together with, the full Disclosures / Disclaimers available at this link, which are incorporated by reference into this report. In particular, this report is intended for general circulation and informational purposes only and does not constitute personal investment advice or a recommendation to buy or sell any investment product or security. You should independently evaluate the information and, where necessary, seek advice from a qualified financial adviser regarding the suitability of any investment. Analyst certifications required under applicable regulations, including SEC Regulation AC (where relevant), are included in this report. By accessing, receiving or using this report, you acknowledge that you have read, understood and agreed to be bound by the Disclosures / Disclaimers, as may be amended, supplemented or updated from time to time.
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