Thailand’s oil refining sector is facing renewed pressure as diesel price controls and rising financial losses threaten to erode profitability, according to a research note by CLSA.
A 2-baht-per-litre reduction in ex-refinery diesel prices, effective from April 9, has already shaved about US$4 per barrel off gross refining margins (GRM). A further cut, set to take effect on April 23, could deepen the squeeze on refinery earnings, the securities firm said.
According to CLSA, refiners are facing a weaker outlook as GRM begins to decline from recent peaks. April margins are estimated at $15-18 per barrel, down sharply from $30-40 during heightened geopolitical tensions. Thai refiners’ GRM was $6-8 per barrel prior to the conflict. A further price cut of 3 baht per litre could wipe out most of the excess profits generated during the recent Middle East conflict.
Continued uncertainty over pricing policy is likely to cap refinery share prices in the near term.
The pressure comes as refiners grapple with elevated cost structures, including crude premiums, insurance and freight costs, which are not fully reflected in GRM, the research noted.
The policy overhang is also casting a shadow over longer-term investment plans. PTT is seeking partners for its refining and petrochemical units, but analysts warn that unclear pricing rules could weigh on investor confidence and delay strategic deals.
While refinery margins are being squeezed by diesel price curbs, some integrated players are better positioned to withstand the pressure.
Among them, PTT Global Chemical (PTTGC) is forecast to return to profit in the first quarter of 2026, with net earnings of 2.1 billion baht, reversing a 5.5-billion-baht loss in the previous quarter, the research noted.
However, the recovery is being diluted by hedging and impairment losses. CLSA estimates hedging losses at $250 million, partly offset by stock gains.
Global supply disruptions linked to the Middle East conflict, including plant damage and feedstock shortages, could remove up to 15% of petrochemical capacity, supporting prices and spreads from the second quarter onwards.
Still, in the near term analysts say the combined impact of state intervention and financial losses is likely to keep refinery earnings and share performance under pressure.
Despite near-term headwinds, CLSA maintains an “outperform” rating on PTTGC with a target price of 43 baht, citing improved spreads and a more favourable supply-demand balance.