Historic low oil prices hardly impact Viet Nam's economy at this time

Oil may reach its lowest price in history this week but its impacts on the world economy and Viet Nam have been limited at this time when the COVID-19 pandemic is keeping people at home and transportation has been cut off.

PetroVietnam said if oil prices dropped by US$1 per barrel, revenue would fall by about VND2.2 trillion ($94.4 million) a year.

o

Nobody could have thought that crude oil would plunge into negative territory meaning sellers had to pay buyers to take deliveries. The first West Texas Intermediate (WTI) crude to be delivered in May fell into negative pricing of US$37.63 per barrel on Monday.

As the May contract expired at Tuesday's close, market insiders said buyers were shying away due to fears of limited storage capacity amid the rising glut of crude.

According to the Vietnam National Oil and Gas Group (Petrovietnam), such action was peculiar at a special time and did not reflect the actual oil price.

"The negative price was only the price traded between traders on the trading floor rather than the transaction price between the crude oil producer and the end user (refinery). The number of contracts traded below zero US dollars was very low," it said.

According to forecasts by global firms and US analysts, crude oil prices would likely increase in June or July 2020.

On Tuesday, the price of US light sweet oil to be delivered in June 2020 on the New York Mercantile Exchange remained at around $16-20 per barrel, and Brent crude, which is a more relevant benchmark for Viet Nam, was traded at $21-25 per barrel on the Intercontinental Exchange (London).

Admitting steep declines in oil prices would impact domestic production and consumption, but head of the General Statistics Office Nguyen Bich Lam said consumers would be unable to gain from historic low oil prices at this time.

While the COVID-19 pandemic takes its toll on the global economy, destroying all economic activities, it would take a long time for demand for oil and petrol to recover, Lam said, noting that low oil prices would not stimulate production and consumption at this time, and not affect economic growth this year.

"The sharp reduction of oil prices will only have a deep impact when the economy is in a stable condition," Lam told Vietnam News Agency.

At present, the significance of the oil price reduction could be seen in controlling inflation as spending on oil and gasoline for production, transportation and electricity production remained huge.

"The drop in gasoline prices is an important factor that caused the CPI in February, March and April to drop, helping lower the average CPI in the first four months of 2020. This enables the economy to keep the inflation rate below the national target of 4 per cent," Lam said.

 

Oil companies lose money

The oil slump, however, will adversely impact revenue for PetroVietnam and the State budget.

The State-owned energy group said that falling oil prices since the beginning of this year had affected revenue and the efficiency of its subsidiaries in all areas.

For oil and gas exploitation, if oil prices dropped by $1 per barrel, revenue would fall by about VND2.2 trillion ($94.4 million) a year. So at a price of $30 per barrel, revenue would decrease by about VND55 trillion this year (compared to the planned price of $60).

Petroleum production and trading activities were also being negatively affected. Oil refineries were suffering losses due to storage, low product price differences (sometimes gasoline is lower than oil) and the risk of stopping operations due to high inventories.

Contributions to the State budget may also decrease by VND18.6 trillion ($798.2 million) per year, it said.

Meanwhile, as crude oil prices continued to slide, many experts have suggested importing oil to save national resources and avoid buying at high prices.

According to a representative from the Viet Nam Energy Association, it would soon submit a proposal to the Ministry of Industry and Trade for importing petroleum at low prices in a bid to facilitate the economy's fast recovery after the pandemic.

Though purchasing crude oil for stockpiling was a reasonable direction that could bring opportunities to the country, PetroVietnam pointed out some obstacles such as the lack of a risk control mechanism and limited storage infrastructure (currently there are only two oil depots at the Dung Quat and Nghi Son refineries).

Nguyen Viet Son, director of the Oil, Gas and Coal Department under the Ministry of Industry and Trade, said the ministry had directed the entire oil and gas industry to immediately build comprehensive solutions to promptly respond to the worst scenario in oil prices in 2020.

It asked PetroVietnam to review its overall plan for oil and gas exploitation and production to determine a reasonable oil price level and to make decisions on the continuation or suspension of low-output wells. It was also instructed to revise a new mine development plan to ensure enough reserves to be ready for the market when oil prices rise.

At the same time, the Ministry of Industry and Trade has reported to the Prime Minister and proposed solutions to support the industry during this period. — VNS

 
 

Other News

.
Coronavirus: Moguls and lobbyists get millions in government aid
Coronavirus: Moguls and lobbyists get millions in government aid
BUSINESSicon  08/07/2020 

Kanye West's apparel brand, Jared Kushner's family and Donald Trump's lawyer were among the recipients.

Hanoi emphasising its investment advantages
Hanoi emphasising its investment advantages
BUSINESSicon  08/07/2020 

While Hanoi is making further improvements to call for fresh investment in development of industrial zones to pick up a new possible wave of investment shifts, the problem of how to efficiently absorb the capital must be taken into consideration.

Fashion rivals continuing to suffer in coronavirus fallout
Fashion rivals continuing to suffer in coronavirus fallout
BUSINESSicon  08/07/2020 

Thousands of dismissed labourers at suppliers in Vietnam has exacerbated the floundering performance of major garment and footwear brands across the globe like Adidas, Nike, and Zara.

Vietnam to increase rice exports to EU under EVFTA
Vietnam to increase rice exports to EU under EVFTA
BUSINESSicon  08/07/2020 

Rice quotas for Vietnam under the EVFTA are expected to push Vietnam’s rice exports up from the second half of this year, according to the Ministry of Industry and Trade (MoIT).

Car sales in Vietnam rocket after registration fee cut
Car sales in Vietnam rocket after registration fee cut
BUSINESSicon  08/07/2020 

After the Government’s move to lower car registration fees by half took effect more than a week ago, the domestic car market has picked up.

State budget revenue reaches seven-year record low
State budget revenue reaches seven-year record low
BUSINESSicon  08/07/2020 

The total State budget revenue was estimated to be at VND668,700 billion, equaling 44.2% of the anticipated amount by the end of June, marking a 10.5% drop over the same period last year and the lowest levels since 2013.

EuroCham stresses importance of stimulus packages in Vietnam’s post-pandemic recovery
EuroCham stresses importance of stimulus packages in Vietnam’s post-pandemic recovery
BUSINESSicon  08/07/2020 

State financial support for companies hit hard by the Covid-19 pandemic, regardless of the level they are yet, and subject to the Government’s consideration in terms of budget range and macroeconomic stability, 

Private sector involvement proposed in Chu Lai airport project
Private sector involvement proposed in Chu Lai airport project
BUSINESSicon  07/07/2020 

The authority of Quang Nam Province has proposed that private investors be allowed to participate in the construction, management and operation of Chu Lai airport, similar to the investment model adopted for Van Don airport in Quang Ninh Province.

Fitch Ratings says Vietnam outperforms among Asia’s frontier sovereigns
Fitch Ratings says Vietnam outperforms among Asia’s frontier sovereigns
BUSINESSicon  07/07/2020 

According to Fitch Ratings, Vietnam is positioned to stand out among Asia’s frontier and emerging markets this year as a result of its economic resilience and success in bringing the novel coronavirus pandemic under control.

Vietnam’s bond market posts highest growth in emerging East Asia: ADB
Vietnam’s bond market posts highest growth in emerging East Asia: ADB
BUSINESSicon  07/07/2020 

The local currency (LCY) bond market in Vietnam posted the highest growth in the emerging East Asia region, as authorities took fiscal and monetary policy actions to mitigate the economic fallout from the coronavirus pandemic.

China is largest plywood investor in Vietnam
China is largest plywood investor in Vietnam
BUSINESSicon  07/07/2020 

China has invested in 29 plywood projects worth over US$150 million in Vietnam, becoming the country’s largest plywood investor, according to Ngo Sy Hoai, vice chairman of the Vietnam Timber and Forest Products Association.

Customs authority discovers multiple cases of origin fraud
Customs authority discovers multiple cases of origin fraud
BUSINESSicon  07/07/2020 

Country of origin fraud cases, wherein Chinese products bear Made-in-Vietnam labels, are on the rise, with Vietnam’s customs authority recently inspecting 76 cases

Thai firm buys two wind power farms in Vietnam
Thai firm buys two wind power farms in Vietnam
BUSINESSicon  07/07/2020 

The move aims to take advantage of low interest rates to build projects with a quick return on investment.

FIEs displeased with government demand to license internal websites
FIEs displeased with government demand to license internal websites
BUSINESSicon  07/07/2020 

The new regulations of the MIC may affect the policies and assets of private businesses and foreign-invested enterprises in Vietnam.

Amended law alters funding landscape
Amended law alters funding landscape
BUSINESSicon  07/07/2020 

The Vietnamese National Assembly has adopted the new Law on Investment, with new rules in favour of foreign investment, including from the US, which is expected to surge in Vietnam in the time to come.

New investment wave starts despite COVID-19
New investment wave starts despite COVID-19
BUSINESSicon  07/07/2020 

The new wave of foreign investment triggered by COVID-19 and US-China trade tensions is becoming more visible as outstanding overseas ventures are expanded.

Stronger money policies might be considered to aid economic growth: SBV
Stronger money policies might be considered to aid economic growth: SBV
BUSINESSicon  07/07/2020 

The State Bank of Vietnam could increase credit growth limits for credit institutions this year or even launch stronger monetary policies to aid the country’s post-pandemic growth, Governor Le Minh Hung has said.

Guiding decrees needed to fight with transfer pricing in Vietnam
Guiding decrees needed to fight with transfer pricing in Vietnam
BUSINESSicon  07/07/2020 

Anti-transfer pricing measures were included in the Law on Tax Administration for the first time, but a guiding decree has not yet been written. Experts said this could mean the rules are less effective.

VN corporate bond market to boom in second half
VN corporate bond market to boom in second half
BUSINESSicon  07/07/2020 

Companies are looking to raise debts from bond issuance before the amended Law on Securities takes effect next January.

Experts warn of scorching-hot growth of solar power in Vietnam
Experts warn of scorching-hot growth of solar power in Vietnam
BUSINESSicon  08/07/2020 

The total capacity of solar power projects registered by investors has become nearly 10 times higher than the targeted level.

 
 
 
Leave your comment on an article

OR QUICK LOGIN