Oil prices drop to 15-month low, oil and gas stocks “run out of fuel”?

The decline in oil prices may put many forecasts at risk of falling into an “offside” position. Most organizations forecast oil prices to remain high at around $90 per barrel in 2023.

After falling more than 15% within 2 weeks, Brent oil price continued to plummet in the second session at the beginning of the week and at one point fell to nearly 70 USD/barrel before recovering. Even so, oil prices are still hovering near their lowest levels in more than a year since December 2021. This is due to the problems of some major banks that have raised concerns about a broader weakening of the world economy.

Along with the downtrend of oil prices that lasted since the middle of last year, the oil and gas group has also not had a really impressive industry wave for a long time, instead, there were only small ripples of each stock. After the strong recovery of the whole market since mid-November last year, only PVD and PVS continued their uptrend but also showed signs of “running out of fuel” recently. GAS has been almost quiet in the past half year while BSR and PVT have slowed down markedly since the end of January 2023.

The decline in oil prices may put many forecasts at risk of falling into an “offside” position. In its industry outlook report, VNDirect expects the average Brent oil price to reach about 90 USD/barrel by 2023. This securities company assesses that it is unlikely that the market will fall into oversupply due to concerns about consumer demand. Slowing consumption could be mitigated by supply side moves (especially from OPEC+), supporting oil prices to maintain high levels next year.

In the same opinion, BSC Securities also believes that the world oil price will continue to remain at a high level due to the tight supply, and is forecast to average 90 USD/barrel in 2023. In addition, the unit price of the products and services of oil and gas enterprises in 2023 may be improved and some oil and gas projects will soon have investment decisions in the near future.

Not as optimistic as forecasts, some oil and gas enterprises plan their business in 2023 quite cautiously on the assumption that oil prices are low. Typically, Binh Son Refinery and Petrochemicals (code BSR) set a revenue target of VND 95,545 billion in 2023, a sharp decrease of 43% and profit after tax decreased by 89% compared to the previous year, to VND 1,628 billion. According to BSR, the plan is built on the assumption that Brent oil price is 70 USD/barrel, and USD/VND exchange rate is 23,500 VND.

Expectations from the super project

The chain of gas and electricity projects at Block B – O Mon has been delayed for many years, 2023 is an important year to promote the project progress in order to get first gas soon (to receive the first gas stream) by the end of 2026. And In order to minimize the risks of delay of this project chain, the Vietnam Oil and Gas Group proposes the Finance and Budget Committee of the National Assembly to support and promote the Government a number of contents as follows:

First: Directing the Electricity of Vietnam and Power Generation Corporation 2 to soon agree and internally approve to sign commercial agreements with PVN in June 2023 as planned.

Second: Direct the investor group of O Mon 2 Power Plant to promote negotiations to soon sign the Gas Sale Agreement Framework Agreement (GSA) with PVN no later than the first quarter of 2024.

Thirdly: Quickly remove obstacles in investment procedures, related to ODA capital of O Mon 3 Power Plant, and approve the feasibility study report (FS) of O Mon 2 Power Plant for power plants. Power can be deployed soon in line with the upstream gas supply schedule (as expected).

According to BSC, in the first stage, drilling activities, construction and installation of rigs create a large amount of work for enterprises providing upstream services such as PVD, PVS or PVC. In the next stage, the works related to the installation and wrapping of pipes in the gas pipeline project will help businesses such as PVS and PVB benefit.

At the exploitation stage, the main investor of the Block B pipeline project (51% capital contribution) is GAS, which will transport up to 7 billion m3 of natural gas per year, equivalent to about 70-80% of sugar production. current pipe of Vietnam.

Ha Linh/Market Lifestyle