Kenanga IB Forecasts Short-Term Petrochemical Price Upside in 2026 Due to Plant Turnarounds
Kenanga Investment Bank (Kenanga IB) projects a short-term bull cycle for petrochemical prices in 2026, primarily due to a peak in plant capacity turnarounds creating temporary supply tightness. Despite an ongoing structural oversupply expected until 2028, this temporary squeeze could lead to an upswing. However, the bank cautions that any rally would be unsustainable long-term. Kenanga IB maintains a 'neutral' stance on the sector, with its Brent crude target at US$67 per barrel, suggesting 2026 oversupply risks may be overstated.
Kenanga Investment Bank Bhd (Kenanga IB) forecasts that petrochemical prices could experience a short-term bull cycle in 2026. This optimism comes despite a weak near-term macroeconomic backdrop and an overall structural oversupply in the market, which Kenanga IB believes could extend until 2028 but is largely priced into current values. The primary driver for this potential short-term upside is a projected peak year for plant capacity turnarounds in 2026, as several major global facilities are due for extensive scheduled maintenance, which can only be deferred for a limited period (six to twelve months). This will lead to temporary tightness in petrochemical supply.However, Kenanga IB emphasizes that the market remains structurally oversupplied in the longer term, implying that any potential petrochemical price upcycle is unlikely to be sustained for years. China is identified as a critical market to monitor due to its substantial global capacity. The local upstream subsector's valuation appears to have bottomed out, though a significant re-rating catalyst is not yet evident. While geopolitical tensions, such as those involving Venezuela, could briefly tighten global oil supply, their overall impact is expected to be manageable, potentially offset by OPEC+ production increases. On the downstream side, product prices are anticipated to remain weak initially due to persistent global oversupply, but 2026 could see a short-term squeeze from plant maintenance activities. Kenanga IB maintains a 'neutral' stance on the sector and keeps its Brent crude target at US$67 per barrel, believing that the oversupply risk for financial year 2026 may be overstated, given OPEC+'s signaled pause in production hikes and demand weakness already priced in by the market.
