KBSV expects Brent crude oil to be around USD 90/barrel in 2023

The Russia-Ukraine war pushed crude oil to a new high of USD 130/barrel in the middle of the year 2022 before retreating to USD 90/barrel by the end of 3Q22. Oil prices are now about $77 per barrel. It can be explained by global recession concerns, which translate into waning demand for crude oil and energy.

In October 2022, crude oil consumption was 101.5 million barrels per day (bpd) (up 9.2% year over year). OPEC expected it to be around 102 million bpd in 2023. Meanwhile, OPEC-13 crude oil production averaged 29.49 million bpd in October, down 210 bpd MoM. OPEC cut production in November in the context of sanctions against Russia. Therefore, supply shortages will likely persist, pushing prices higher.

KBSV expects Brent crude oil to be around USD 90/barrel in 2023, backed by: (1) the ongoing Russia-Ukraine war; (2) supply shortages amid Western sanctions on Russian energy and production cuts by OPEC; and (3) recovering demand following China’s reopening.

Existing large gas fields in Vietnam are depleting, so it is of great importance to develop new ones. The construction of the Block B-O-Mon gas pipeline, with its huge investment cost, should start in the coming time. In August 2022, the investment plan for O Mon III Thermal Power Plant, a critical downstream project of Block B-O Mon, was approved. It would accelerate the approval of the entire Block B-O Mon project, driving oil and gas enterprises.

Oil and gas stock prices have moved proportionally with oil prices, experiencing sharp corrections at the end of October 2022 and starting to recover in November in line with the general market trend. Gas prices at PV Gas, the industry's leading stock, were almost flat at 100,000 VND per share thanks to high selling prices linked to global prices and Vietnam's shift to natural gas and imported LNG for electricity generation to meet long-term demand.

"In general, the outlook for the oil and gas sector is bright in the coming time if oil prices continue to stay high and new project implementation is on schedule", said KBSV.

In KBSV’s view, the biggest risks facing the oil and gas industry in the time ahead are: (1) unpredictable fluctuations in oil prices; and (2) the slow approval process and resultant construction progress of large oil and gas projects.