PETALING JAYA: The current supply-driven disruption in global energy markets has materially altered the operating landscape for the petrochemical sector, shifting the industry from a period of oversupply to one characterised by tight feedstock availability, elevated input costs and heightened pricing volatility.
MBSB Research said in a report that the International Energy Agency had sharply revised its 2026 oil demand outlook from growth of 730,000 barrels per day (bpd) to a contraction of 80,000 bpd, reflecting what it describes as the largest supply disruption in history and reinforcing a supply-driven risk premium in crude prices, which has surged to above the US$110-per-barrel mark.
The research house told clients that elevated oil prices and persistent supply constraints were increasingly weighing on downstream demand, with the petrochemical sector experiencing a material slowdown driven by affordability pressures and limited feedstock availability.
Asian petrochemical producers have reduced operating rates due to restricted access to naphtha and liquefied petroleum gas (LPG), resulting in a structural shift from oversupply to a tight risk-priced market characterised by physical scarcity, it said.
MBSB Research said in contrast to many of its Asian peers, Petronas Chemicals Group Bhd
is relatively insulated due to Malaysia’s domestic natural resource base.
The group’s primary competitive advantage lies in its heavy reliance on natural gas, which forms the backbone of its operations, and as a result, its share price has demonstrated notable resilience during the crisis, supported by its relatively secure access to domestic feedstock.
An analyst told StarBiz: “The petrochemical industry is being pulled into a new reality, which is defined less by overcapacity and more by scarcity, cost pressures and definitely unpredictable price swings.”
MBSB Research in its report said elevated prices, coupled with ongoing supply constraints, are beginning to weigh on downstream demand, with the impact becoming increasingly visible across multiple industries.
The petrochemical sector is now experiencing a material slowdown in activity, driven by both affordability pressures and physical supply limitations, it added.
“With that, Asian producers have reduced operating rates due to constrained access to key inputs such as naphtha and LPG, both of which are typically transported through the Strait of Hormuz.
“As a result, the industry has shifted from a prolonged period of oversupply to one characterised by tight supply, risk-driven pricing and physical scarcity.”
MBSB Research said producers in South Korea, Singapore and Indonesia remain particularly vulnerable, as they lack sufficient domestic crude oil to meet industrial demand and rely heavily on imported feedstock.
Within this environment, feedstock security has emerged as a key differentiator, with players possessing access to domestic resources demonstrating greater resilience relative to import-dependent peers, it added.
