Saudi Arabia cuts crude prices, boosting Thai refinery stocks TOP and PTTGC

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Summary · why it matters

Saudi Arabia unexpectedly announced a cut to its official selling price, or OSP, for crude for Asian customers for November, lowering the price of Arab Light shipped to Asia to a discount of 5 US dollars per barrel, from a discount of less than 3 US dollars per barrel the previous month, the widest discount since June 2020, running counter to market expectations that the OSP would be raised. The OSP cut aims to offset sharply higher freight costs and help preserve Saudi Arabia's market share in Asia. KGI Securities (Thailand) views this as positive for Thai refinery stocks because it helps lower feedstock costs, particularly for IRPC, which uses Arab Light crude in a significant proportion, while other beneficiaries in the group include SPRC, TOP, BCP and PTTGC. Krungsri Securities views Saudi Aramco's announcement of a roughly 5 US dollar per barrel cut to the price of Arab Light crude for delivery to buyers in the Asian market for November orders, the lowest price in six years, as reflecting a desire to preserve market share and as a direct positive factor for Thai refinery operators, since the crude premium has fallen and this supports higher refining margins. On the petrochemical side, the HDPE spread edged down 1% from the previous week to 468 US dollars per tonne from 472 US dollars per tonne, while the PP spread held steady at 516 US dollars per tonne. The spreads of both products remain above pre-war levels of below 300 US dollars per tonne. In the polyester market, the PET spread in Asia rose 36% from the previous week to 106 US dollars per tonne from 78 US dollars per tonne. However, KGI expects PET demand to weaken seasonally during the approaching winter, which could pressure the PET spread going forward.

Impact on assets 6

Energy▲
IRPC Public Company Limited
IRPC
▲ PositiveSupplyrelevance

KGI highlights IRPC as a key beneficiary since it uses Arab Light crude in significant proportion, lowering its feedstock costs.

Energy Transition & Power Demand▲
Thai Oil Public Company Limited
TOP
▲ PositiveSupplyrelevance

Named beneficiary of Saudi Arabia's Arab Light price cut, lowering feedstock costs and boosting refining margins.

Materials▲
Financials▲

Off-coverage companies 1

Saudi Aramcoi
Private± Mixedrelevance