Potential for petrochemical prices to see short-term upside this year

KUALA LUMPUR: Petrochemical prices in 2026 may 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. However, it 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 to 2024), as several major clusters of plants are due for major turnarounds,” it said in a note.

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 added.

Kenanga IB highlighted that China remains the key market to watch, as it has the largest capacity (million tonnes per annum) globally. Simultaneously, it noted that the local upstream subsector also appears to have bottomed out in valuation terms, with price-to-book value at a two-year low.

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