Refining & Chemicals - Asia Pacific: Look beyond near-term uncertainties on refineries; prefer KKPC among petchem

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Refining & Chemicals - Asia Pacific: Look beyond near-term uncertainties on refineries; prefer KKPC among petchem

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Refining & Chemicals - Asia Pacific

Look beyond near-term uncertainties on

refineries; prefer KKPC among petchem

Estimate Change

Refineries: look beyond near-term uncertainties 09 June 2026

The share price of refining companies declined by 9% on average after their 1Q earnings Equity

releases, which we partly attribute to uncertainties in the near-term earnings outlook Asia Pacific

from 1) impacts of the domestic fuel price cap; and 2) potential inventory losses Refining & Chemicals

following crude oil price volatility (brent crude price -14% from end-1Q26). While we see Sun Jung Lee >>

that the price cap in domestic market prompts operating losses, limiting a full capture of Research Analyst

higher GRMs (domestic sales % of refining division in 1Q: S-Oil 50%, SK Energy 44%, GS Merrill+82 2 3707Lynch0538(Seoul)

Caltex 26%) in 2Q, the government’s loss-compensation is likely to be recognized in 2H. sunjung.lee@bofa.com

The price control policy is expected to be lifted once crude benchmarks stabilize. Taekyoung Ha >>

Research Analyst

Merrill Lynch (Seoul)

taekyoung.ha@bofa.comExpect mid/long-term tight supply of refined products

Despite the uncertainties, we expect the Asia GRM to support 2Q/2H earnings. QTD Asia

GRM has reached US$39/bbl, up 84% QoQ, with GRM as of 5 June remaining at

AbbreviationsUS$25/bbl. It is noteworthy that GRM had already reached US$11/bbl in 4Q25 before

NT = near-termMiddle East conflicts, backed by tight supply for refined products (pre-war forecasts:

L-T = long-termincremental capacity growth of 0.63mn/0.84mn bpd in ‘26/27 vs. incremental demand of

ME = Middle East1mn/1mn bpd).