Kuala lumpur:<Text>

Petrochemical prices in 2026 could 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, but believes this has largely been priced into petrochemical prices.

According to BERNAMA News Agency, moving into 2026, Kenanga IB believes there is a chance of a peak year for plant capacity turnarounds, as several major clusters of plants are due for major maintenance. These factors could result in short-term tightness in petrochemical supply in 2026, as a large wave of plants will undergo scheduled major maintenance, which could only be further deferred by six to 12 months.

Kenanga IB emphasized that while there is potential for a price upcycle, the market remains structurally oversupplied in the longer term, making a sustai ned upcycle unlikely. It highlighted China as the key market to watch, given its status as the largest capacity holder globally. Additionally, the local upstream subsector appears to have bottomed out in valuation terms, with price-to-book value at a two-year low.

The report also mentioned geopolitical factors, such as tensions between Venezuela and the United States, which could impact global oil supply. However, even if Venezuela's production is completely halted, OPEC+ production increases could offset this loss. On the downstream side, product prices are expected to remain weak due to persistent global oversupply.

Kenanga IB maintained a 'neutral' stance on the sector, keeping its Brent crude target unchanged at US$67 per barrel. This reflects the view that the oversupply risk in 2026 may be overstated, especially with OPEC+ signalling a pause in production hikes and demand weakness being largely priced in by the market.