Kenanga IB: Petrochemical Prices May See Short-term Upside In 2026

KUALA LUMPUR, Jan 5 (Bernama) -- Petrochemical prices in 2026 could enter a short-term bull cycle despite a weak near-term macroeconomic backdrop, according to Kenanga Investment Bank Bhd (Kenanga IB).

The investment bank said that overall, the petrochemical market remains in a structural oversupply situation that could potentially extend to 2028, but believes this has largely been priced into petrochemical prices.

“Moving into 2026, we believe there is a chance of a peak year for plant capacity turnarounds (compared with 2023–2024), as several major clusters of plants are due for major turnarounds,” it said in a note today.

These factors could result in short-term tightness in petrochemical supply in 2026, as a large wave of plants will be required to undergo scheduled major maintenance, which could only be further deferred by six to 12 months.

“On the other hand, we remain cognisant that the market is structurally oversupplied in the longer term, and any potential petrochemical price upcycle is unlikely to be sustained for years,” it said.

Kenanga IB highlighted that China remains the key market to watch, as it has the largest capacity (million tonnes per annum) globally.

At the same time, it noted that the local upstream subsector also appears to have bottomed out in valuation terms, with price-to-book value (PBV) at a two-year low.

“However, we acknowledge that a meaningful re-rating catalyst remains distant at this juncture. In Venezuela, tensions with the United States have led to President Nicolas Maduro being seized by the US military, citing narco-terrorism charges.

“In terms of its impact on global oil supply, this could tighten supply in the near term, but Venezuela’s recent production of 0.8–0.9 million barrels per day, even if completely halted, which is an unlikely scenario, could be offset by OPEC+ production increases, should they react,” it said.

On the downstream side, Kenanga IB said product prices are expected to remain weak in the near term due to persistent global oversupply.

“That said, we see potential for a short-term supply squeeze in 2026, driven by higher-than-normal plant turnaround activities as a major cluster of global facilities undergo maintenance phases,” it said.

Kenanga IB maintained a ‘neutral’ stance on the sector, with its Brent crude target unchanged while remaining above consensus at US$67 per barrel.

“This reflects our view that the oversupply risk in financial year 2026 may be overstated, as OPEC+ has signalled a pause in production hikes in the first quarter of calendar year 2026, and demand weakness appears largely priced in by the market,” it added.

-- BERNAMA