Shenwan Hongyuan Group Co., Ltd. has released a research report outlining its outlook for the petrochemical industry through 2026. The report anticipates a higher oil price equilibrium, with upstream companies set to benefit, while downstream sectors will undergo a restructuring of their competitive dynamics.
Oil & Gas Exploration: Supported by Overseas Supply, Oil Price Center Moves Higher
The report forecasts the Brent crude oil price to trade within a range of $80 to $120 per barrel in 2026. On the supply side, geopolitical factors, including a blockade of the Strait of Hormuz, have significantly restricted the export of nearly 20 million barrels per day of crude oil and products. Although tensions may ease, global crude inventories have already been drawn down. Furthermore, restarting production at certain Middle Eastern oilfields will require time, providing strong support from the supply side. On the demand side, high prices may suppress short-term consumption, but medium- to long-term demand is expected to continue growing. The firm concludes that the underlying support from crude oil supply and demand remains robust. Even if geopolitical conflicts moderate, the price center is likely to stay elevated, a view supported by the narrowing spread between near-term and longer-dated oil futures contracts.
Refining & Petrochemicals: Accelerating Overseas Capacity Shutdowns, Reshaping the Global Landscape
Beyond its impact on crude oil, geopolitical tensions are expected to significantly affect global refinery operations. Significant shortages in crude oil transportation have sharply increased costs for refiners, severely disadvantaging smaller, less efficient facilities. The stability of feedstock supply chains in some regions is also under considerable pressure, leading to more refinery maintenance shutdowns and reduced operating rates. With overseas refinery operations already declining noticeably, product margins abroad have improved significantly due to supply constraints. While domestic product prices in China are influenced by pricing mechanisms, the outlook for chemical product margins is promising.
In the long term, the phase of adding new refining capacity in China is largely concluding. The cap of 1 billion tons of refining capacity establishes a foundation for improved industry conditions. The current overseas energy supply shock presents an opportunity for domestic refiners to gain a significant competitive advantage globally, thanks to their stable or diversified procurement channels. For the light hydrocarbon industry, rising crude oil prices are expected to create substantial energy arbitrage opportunities, leading to direct benefits for their financial performance.
Polyester: Slowing Capital Expenditure Growth, Rebalancing Under High Oil Prices
Future new investments in the polyester industry chain are limited, with a rebalancing anticipated under high oil prices by 2026. The core logic for polyester lies in supply and demand dynamics. With the conclusion of major capital expenditure cycles and stable downstream demand, operating rates are expected to see year-on-year improvement in 2026. For purified terephthalic acid (PTA), major capacity expansions have ended, with no significant new capacity expected in 2026. Combined with coordinated production cuts by leading companies, there is considerable room for a recovery in profitability.
For polyester filament, future capacity growth is projected to remain at 2-3%, with expectations of improved downstream demand leading to higher operating rates. The phase of adding new capacity for polyethylene terephthalate (PET) bottle resin is also nearing its end, with limited new capacity expected in 2026, suggesting favorable conditions for industry coordination.
The report notes risks including concentrated industry capacity additions and potential downturns in global demand and the economy.