UBS Investment Research
Asia Oil Explorer
S ome isolated bright spots
􀂄 Shares rally in India
In the past month, shares of Reliance Industries, GAIL, Hindustan Petroleum,
Bharat Petroleum, and India Oil Corp have risen anywhere from 15% to 29%. This
is partly on a rebound in the Bombay Stock Exchange, but it is also because lower
oil prices have benefited India’s state-owned refiners, given fuel price caps. In
Thailand, PTT Aromatics has also risen 20% in the past month.
􀂄 Solid Q208 for LDK Solar and PTT Public
For LDK Solar, a 61% YoY increase in shipments led to a surprisingly strong
Q208. LDK Solar also gave a meaningful boost to its revenue guidance for 2008,
which led us to raise our earnings estimates. PTT Public reported Q208 pre-ex EPS
of Bt12.1/sh (up 43% YoY, up 73% QoQ and well above UBS’s forecast for
Bt8.6/sh) following better-than-expected earnings results at most of its affiliates.
􀂄 Gasoline arbitrage opportunity opens unexpectedly
The ongoing fall in refining margins was stemmed by the opening of the first
arbitrage opportunity this year to ship gasoline from Asia to the US. The pace of
the decline in middle distillate spreads also slowed. However, with Singapore
middle distillate inventories near a five-year high, we believe margins could come
down further.
􀂄 Regionally, we still prefer upstream
We expect Brent crude oil prices to remain near US$120/bbl on average in H208
and we remain structurally bullish on oil prices in the long term. Hence we
reiterate our long-term preference for upstream top picks PTT Exploration and
Production (Buy) and Cairn India (Buy).

Contents page
UBS forecasts 5
Product price & margin 6
— Crude oil price & spread.......................................................................................6
— CFTC traders’ report ............................................................................................8
— Olefins .................................................................................................................9
— Olefin derivates ..................................................................................................10
— Upstream aromatics ...........................................................................................12
— Midstream/downstream aromatics......................................................................13
— Vinyls chain........................................................................................................14
US refining inventory & utilisation 15
US refining margins 17
Singapore refining inventory 18
Japan refining inventory 19
Refining margins & spreads 21
Recent oil & chemical reports 22
Stock performance & valuations 23
— China .................................................................................................................23
— Taiwan ...............................................................................................................25
— Thailand.............................................................................................................27
— Korea .................................................................................................................29
— India...................................................................................................................31
— Other Asia Pacific Countries...............................................................................35
— Solar stocks .......................................................................................................36
Valuations: Oil & Chemicals 37
Recent notes 43
— Global I/O: Solar Industry ...................................................................................44
— Reliance Industries.............................................................................................45
— PTT Aromatics and Refining...............................................................................46
— LDK Solar Co Ltd ...............................................................................................47
— PTT Public Company Ltd. ..................................................................................48

Oil hits a three-month low
WTI crude oil prices closed at US$113.8 on 15 August, down 1% from the
previous week. Meanwhile, Brent crude fell 1.5% in the same period to close at
US$110.8/bbl. US crude oil inventories decreased 316Kbbl in the week ended
August 8, compared with analyst expectations of a 300Kbbl build. Distillate fuel
stocks declined 1.8Mbbl, compared with expectations of a 1.95Mbbl build, in
the same period. Gasoline stocks fell 6.4Mbbl, much steeper than the 2.2Mbbl
drop that analysts had expected.
Gasoline spreads up last week
The Reuters Singapore Complex Refining Margin Index averaged US$4.2/bbl
for the week ended 15 August, up from an average of US$3.8/bbl the previous
week. Simple refining margins narrowed to an average of US$0.6/bbl, from
US$0.8/bbl the previous week. The 10-day moving average for the Reuters
complex refining margin index was US$4.0/bbl, compared with US$6.3/bbl at
the same time last year.
For the week ended 15 August, when compared to Dubai crude oil prices,
average spreads for gasoline (95) increased US$1.7/bbl to close at US$3.4/bbl,
as an arbitrage window opened to send gasoline from Asia to the US this month.
Spreads for diesel and kerosene fell US$2.0/bbl and US$0.6/bbl, to US$18.8/bbl
and US$25.1/bbl, respectively, while Singapore middle distillate inventories
were near a five-year high. At the same time, the fuel oil discount to Dubai
crude deepened to negative US$12.9/bbl, on average, from negative
US$11.9/bbl the previous week. The Singapore complex refining margin index
has averaged US$6.95/bbl so far this year, compared with US$7.93/bbl in the
same period in 2007. We believe complex refining margins will be down QoQ
and YoY in Q308.
PE rebound may only be technical
Chinese domestic PE prices staged a rebound (we believe a technical one), up
Rmb75-400/t to Rmb13,000-13,500/t (US$1,490-1,550/t import parity
equivalent), on lower volume offers from Sinopec and Petrochina. PP and PVC
however, continued their declines to Rmb12,975/t (US$1,490/t import parity
equivalent) and Rmb8,050/t (acetylene based), respectively. Regional PE, PP
and PVC prices are all significantly higher. We believe most of these products
have very few transactions and regional prices are likely to trend towards China
domestic import parity prices in the coming months. In fact, PVC is beginning
to be exported out of China again, with offers pegged at Rmb8,050/t or
US$1,150/t FOB China. We think this will bring down regional prices from the
current level of near US$1,325/t. Regional ethylene and propylene prices fell to
as low as US$1,400/t from lows of US$1,470-1,550/t the previous week.
With the drop in gasoline prices, benzene fell further to close the week at
US$1,130/t, down US$75/t. PX fell to US$1,410/t, PTA was down US$40/t at
US$1,065/t and MEG plunged further to US$900/t. PX-naphtha spreads are still
relatively healthy but may come under pressure once PTT Aromatics & Refining
starts up its new 600Kt plant in September