We maintain a “Neutral” rating on the energy sector. While we anticipate robust earnings for refineries in 4Q24E, driven by improving refining margins, the sector faces significant headwinds. IEA forecasts a global oil supply surplus of 0.9 mbd in 2025E, representing approx. 1% of global demand. This surplus could intensify to 1.4 mbd if OPEC+ increases production in April. This oversupply scenario is likely to exert downward pressure on crude oil prices, impacting upstream profitability. We anticipate Dubai crude prices to decline to USD73/bbl in 2025E from an average of USD79/bbl-USD80/bbl in 2024. Furthermore, above-long-term-average natural gas reserves in the European Union may cap price increases for both coal and natural gas in the coming year. Also, domestic oil retailers are expected to maintain stable marketing margins next year but regulatory risks remain a key concern. Despite the sector-wide challenges, we expect a strong 4Q24E for refineries. Marketing/operating GRMs should improve, supported by a widening crack spread in middle distillates.

The SETENERG index has underperformed the SET Index by 8% over the past six months, mirroring a trend of falling crude oil prices. We pick SPRC (BUY, Target price: Bt8.50) as Top Pick for Energy sector as we believe that a recent price correction should already reflect its weak 3Q24 earnings performance. Looking forward, we anticipate an earnings recovery in 4Q24E, largely driven by improved refining margins and a potential decrease in stock loss.