ab Global Research owered by UBS Evidence Lab YES P 3 December 2025 China Oil Product Monthly Highly volatile overseas refining margins; uncertainty about 2026E VLCC rates Overseas refining margins sharply fluctuated amid geopolitical situation Overseas refining margins notably expanded in November. The UBS European Composite Refining Margin rose from cUS$14/bbl in late October to cUS$20/bbl, chiefly driven by drone attacks on Russian refining facilities, outages at some refineries, and US sanctions on Rosn ...

Summary of Key Points from the Conference Call Industry Overview - **Industry**: Oil, Gas, and Chemical Sector in China - **Outlook Period**: 2026-2028 Oil Market Insights - **Brent Crude Price Forecast**: UBS projects average prices of US$64, US$70, and US$75 per barrel for 2026, 2027, and 2028 respectively [7][10][12] - **OPEC+ Production Cuts**: The second tranche of OPEC+'s voluntary cuts of 1.65 million barrels per day (Mb/d) may conclude in December 2026, with effective production increases expected to be only 40% of the headline numbers [2][24] - **China's Oil Demand**: Anticipated declines in gasoline and diesel demand by 4.4% and 3.7% year-over-year (YoY) in 2025 and 2026 respectively, driven by the rise of electric vehicles (EVs) [2][53] Natural Gas Market Insights - **Asia LNG Price Forecast**: Expected prices of US$12.8 and US$11.5 per million British thermal units (MMBtu) for 2025 and 2026 respectively, with long-term prices approaching US$7-8/MMBtu [2][41][47] - **China's Natural Gas Demand Growth**: Projected compound annual growth rate (CAGR) of 3-4% from 2025 to 2030, despite a 1% YoY decline in H1 2025 due to various economic factors [48][52] Chemical Sector Insights - **Earnings Recovery**: The petrochemical industry is expected to rebound due to overseas capacity exits and China's anti-involution policies [3] - **Preferred Sectors**: Recommendations include PTA, silicone, and glyphosate sectors, focusing on industries with low profitability and potential for improved utilization rates [3] New Materials Insights - **Lithium Hexafluorophosphate (LiPF6)**: Prices expected to remain strong in 2026, with demand growth outpacing effective capacity growth [4] - **Memory Chip Cycle Recovery**: Anticipated support for earnings rebound for electronic gas and wet chemical producers [4] Stock Recommendations - **Oil Companies**: Favorable outlook for PetroChina A/H, CNOOC A/H, and Sinopec A/H due to expected recovery in oil prices and attractive dividend yields [5] - **Chemical Companies**: Recommendations include Wanhua Chemical, Baofeng Energy, and Hengli Petrochemical [5] - **New Materials**: Positive outlook for Capchem, Sinocera, and Jiemei as beneficiaries of the electrolyte and MLCC cycle recoveries [5] Risks and Considerations - **Oil Price Risks**: Potential upside risks include firmer global economic growth and geopolitical tensions, while downside risks involve a global economic slowdown and weaker compliance from OPEC+ [9][10] - **Natural Gas Market Volatility**: Expected tightness in the global LNG market until 2030, with potential disruptions leading to elevated prices [41][47] Additional Insights - **EV Penetration**: Domestic EV penetration in China has exceeded 50% since April, with expectations to reach 76% by 2030 [54][55] - **China's Crude Imports**: A 3% YoY increase in crude imports in 9M25, attributed to lower oil prices and inventory scaling [60]

Group 1: Skillsoft Corp. (SKIL) - Skillsoft is an instructor-led training services company with a Zacks Rank 1 [1] - The Zacks Consensus Estimate for its current year earnings has increased by 240.9% over the last 60 days [1] - Skillsoft has a PEG ratio of 0.36 compared to the industry average of 0.98, and it possesses a Growth Score of B [1] Group 2: Micron Technology, Inc. (MU) - Micron Technology is a memory and storage products company with a Zacks Rank 1 [2] - The Zacks Consensus Estimate for its current year earnings has increased by 24.4% over the last 60 days [2] - Micron has a PEG ratio of 0.51 compared to the industry average of 1.45, and it possesses a Growth Score of A [2] Group 3: Ultrapar Participaçoes S.A. (UGP) - Ultrapar is a distributor of liquefied petroleum gas, gasoline, ethanol, diesel, fuel oil, and kerosene with a Zacks Rank 1 [3] - The Zacks Consensus Estimate for its current year earnings has increased by 51.9% over the last 60 days [3] - Ultrapar has a PEG ratio of 1.96 compared to the industry average of 2.44, and it possesses a Growth Score of A [3]

Core Viewpoint - Iraq has directed a halt on imports of middle distillates, claiming self-sufficiency due to increased oil production and refining capacity [1][2] Group 1: Oil Production and Exports - Iraq's oil production has increased, particularly from the Nasiriyah field, which now produces 80,000 barrels per day [1] - Total oil exports from Iraq averaged between 3.4 and 3.45 million barrels per day in September [1] Group 2: Refining Infrastructure - Iraq's refining capacity is currently around 1.3 million barrels per day, with plans to increase it to over 1.5 million barrels per day [2] - The refining sector has been significantly upgraded since late-2022, following the formation of a new government [2] - Previous terrorist attacks had severely degraded the refining infrastructure, notably the destruction of the Shamal refinery in 2014 [2] Group 3: Import Dynamics - Iraq primarily imports gasoline and gasoil diesel, but has made significant upgrades to its refineries in Karbala, Basra, and Kirkuk [3] - Despite claims of self-sufficiency, Iraq still imports high-octane gasoline and certain low-sulfur diesel grades that do not meet Euro-spec quality [3] - Customs data indicates that Iraq imported 50,000 barrels per day of gasoline in the first half of the current year, down from 120,000 barrels per day last year [4]

Core Insights - Three stocks with strong growth characteristics and buy ranks are highlighted for investors: Ultrapar Participaçoes S.A., Zurn Elkay Water Solutions Corporation, and Seagate Technology Holdings plc [1][2][3] Company Summaries - **Ultrapar Participaçoes S.A. (UGP)**: - Zacks Rank 1 - Current year earnings estimate increased by 51.9% over the last 60 days - PEG ratio of 1.90 compared to the industry average of 2.45 - Growth Score of A [1][2] - **Zurn Elkay Water Solutions Corporation (ZWS)**: - Zacks Rank 1 - Current year earnings estimate increased by 4.2% over the last 60 days - PEG ratio of 2.23 compared to the industry average of 2.68 - Growth Score of B [2] - **Seagate Technology Holdings plc (STX)**: - Zacks Rank 1 - Current year earnings estimate increased by 7% over the last 60 days - PEG ratio of 1.00 compared to the industry average of 1.47 - Growth Score of B [3]

Group 1: Skillsoft Corp. (SKIL) - Skillsoft is an instructor-led training services company with a Zacks Rank 1 [1] - The Zacks Consensus Estimate for its current year earnings has increased by 240.9% over the last 60 days [1] - The company has a PEG ratio of 0.51, compared to 0.96 for the industry, and possesses a Growth Score of B [1] Group 2: Construction Partners, Inc. (ROAD) - Construction Partners is a civil infrastructure company with a Zacks Rank 1 [2] - The Zacks Consensus Estimate for its next year earnings has increased nearly 2% over the last 60 days [2] - The company has a PEG ratio of 1.03, compared to 1.71 for the industry, and possesses a Growth Score of B [2] Group 3: Ultrapar Participaçoes S.A. (UGP) - Ultrapar is a distributor of liquefied petroleum gas, gasoline, ethanol, diesel, fuel oil, and kerosene with a Zacks Rank 1 [3] - The Zacks Consensus Estimate for its current year earnings has increased by 33.3% over the last 60 days [3] - The company has a PEG ratio of 1.97, compared to 2.56 for the industry, and possesses a Growth Score of A [3]

Summary of Key Points from the Conference Call Industry Overview - The report focuses on the oil industry, particularly crude oil and petroleum products, with insights into market dynamics and seasonal impacts on demand and supply [1][2][10]. Core Insights and Arguments 1. **Crude Oil Fundamentals**: Despite softer fundamentals, OPEC+'s production return is impacting crude oil prices, with inventories building and Brent crude prices pressured towards $60/bbl [1][2]. 2. **OECD Inventories**: OECD commercial crude oil inventories are building, with a preliminary monthly stock increase of over 10 million barrels, contributing to downward pressure on Brent prices [2]. 3. **Dangote Refinery Issues**: Uncertainties surrounding Nigeria's Dangote refinery operations are affecting gasoline supply, with a significant reduction in gasoline output due to operational challenges [3][20]. 4. **Gasoil Crack Spreads**: Gasoil crack spreads are currently wide due to low stocks, but are expected to moderate in 2026 as refinery production strengthens and demand flattens [4][24]. 5. **Winter Demand Projections**: Potential for wider gasoil cracks this winter exists due to the possibility of a cold winter and geopolitical tensions, which could temporarily boost demand for heating fuels [5][25]. 6. **Kerosene Demand**: Demand for kerosene is expected to moderate, but a cold winter in East Asia could lead to price increases due to its use as a heating fuel [6][39]. 7. **Geopolitical Tensions**: Recent de-escalation in geopolitical tensions, particularly in the Middle East, may reduce the price premium on oil, impacting market dynamics [10][12]. 8. **Managed Money Positioning**: Managed money positioning in Brent and WTI is at its second lowest in the last decade, indicating potential for a price rebound if geopolitical tensions escalate or if winter demand spikes [16][18]. 9. **Price Forecasts**: The base case price forecast for Brent is $63/bbl in 4Q25 and $60/bbl in 1Q26, with a bear case suggesting lower averages of $55/bbl and $50/bbl respectively [17]. Additional Important Insights 1. **Refinery Margins**: Refining margins have been climbing throughout the year, indicating improved profitability for refiners [27][29]. 2. **Weather Analysis**: The report includes a weather analysis suggesting a milder winter in the US, colder conditions in East Asia, and normal temperatures in Europe, which could influence energy demand [7][51]. 3. **La Niña Impact**: NOAA forecasts a potential La Niña winter, which typically brings colder conditions to Northeast Asia and warmer, drier weather to the southern US [52][55]. 4. **Stockpiling Trends**: China's oil purchases have slowed, potentially allowing the market to front-run its purchases, which could eventually support oil prices again [12][38]. This summary encapsulates the key points discussed in the conference call, providing a comprehensive overview of the current state and future outlook of the oil industry.

Group 1: Market Dynamics - The current geopolitical risks and strong global demand indicate a potential shift towards a bullish market environment, with OPEC+'s production increases possibly insufficient to counter this trend [1] - Reports suggest a possible oil glut in the coming months, yet the market remains stable, influenced by geopolitical threats rather than OPEC+ actions [4][9] - The ongoing conflict and attacks on Russian oil infrastructure are leading to significant disruptions in Russia's export capabilities, impacting global oil supply [5][6] Group 2: Ukraine's Military Impact - Ukraine's drone strikes have effectively targeted Russian oil refineries and logistics, significantly degrading Russia's ability to export petroleum products [2][3] - The introduction of the Flamingo Missile by Ukraine could further escalate the situation, potentially causing substantial damage to Russian oil infrastructure [5] - Ukrainian military actions are seen as the most effective sanctions against Russia's war economy, impacting its hydrocarbon monetization options [3] Group 3: Russian Oil Supply Challenges - Reports indicate severe fuel shortages in Russia, affecting both the war economy and increasing the risk of internal unrest [6] - Despite increasing seaborne crude exports, Russia's lack of storage capacity limits its options, leading to potential domestic production shutdowns if export volumes cannot be maintained [7] - The geopolitical landscape suggests that any increase in Russian crude exports may not alleviate the tightening of global product availability, particularly in consuming regions [8]

Core Insights - Three stocks are highlighted with strong income characteristics and a buy rank for investors to consider on May 5 Group 1: Euroseas Ltd. (ESEA) - Euroseas Ltd. is an ocean-going transportation services company with a Zacks Rank 1 [1] - The Zacks Consensus Estimate for its current year earnings has increased by 8% over the last 60 days [1] - The company offers a dividend yield of 8%, significantly higher than the industry average of 2.5% [1] Group 2: NatWest Group plc (NWG) - NatWest Group plc is a banking and financial services company with a Zacks Rank 1 [2] - The Zacks Consensus Estimate for its current year earnings has increased by 5.6% over the last 60 days [2] - The company has a dividend yield of 5.9%, compared to the industry average of 3.7% [2] Group 3: Ultrapar Participaçoes S.A. (UGP) - Ultrapar Participaçoes S.A. is a distributor of liquefied petroleum gas, gasoline, ethanol, diesel, fuel oil, and kerosene with a Zacks Rank 1 [3] - The Zacks Consensus Estimate for its current year earnings has increased by 6.5% over the last 60 days [3] - The company offers a dividend yield of 4.4%, slightly above the industry average of 4.3% [3]

Group 1 - The article discusses the analysis of oil and gas companies, specifically focusing on Exxon Mobil and its valuation within the industry [1] - It highlights the historical context of Exxon Mobil, noting that kerosene was the primary product until gasoline sales surpassed it in 1911 after the breakup of Standard Oil [2] - The cyclical nature of the oil and gas industry is emphasized, indicating that it requires patience and experience to navigate effectively [2] Group 2 - The article mentions that the author has a beneficial long position in Exxon Mobil shares, indicating a personal investment interest [3] - It clarifies that the article is not intended as investment advice and encourages investors to review company documents for their own investment decisions [4] - The article notes that past performance is not indicative of future results, emphasizing the need for individual assessment of investment suitability [5]