Oil stocks sees bright prospect amid rising prices

Friday, Apr 05, 2024 04:47

An oil rig constructed by PetroVietnam Technical Services Corporation (PVS). — Photo petrotimes.vn

Current rallies in the global oil market, which are likely to push prices to higher levels than expected, are seen as a positive driver for domestic oil and gas stocks. 

The Mercantile Exchange of Vietnam (MXV) reported that natural gas rose over 4 per cent in the first trading day of April, making it the top-performing commodity in the market. 

Meanwhile, oil prices maintained their upward momentum, reaching the highest level in the past five months, as signals pointed to tighter supplies.

On Thursday, Brent futures for June hovered at a five-month high, trading at US$89.19 a barrel. 

According to a survey conducted by Reuters, the oil production of the Organisation of the Petroleum Exporting Countries (OPEC) decreased by 50,000 barrels per day in March compared to February, resulting in a daily output of 26.42 million barrels. 

The largest reduction in production came from Iraq and Nigeria. Nigeria saw a substantial decline in exports to meet the domestic demand for the Dangote oil refinery.

Top oil exporter Saudi Arabia may also raise the official selling price (OSP) for flagship Arab Light crude in May, Reuters reported. This reflects the shortage of supply in the market.

On the other hand, several positive macroeconomic signals are driving purchasing momentum in the crude oil market. 

The National Bureau of Statistics of China recently said that China’s manufacturing Purchasing Managers' Index (PMI) was 50.8 in March, bouncing back to the expansion zone from 49.1 in February. This marked the first expansion in factory operations in China in the past five months.

Similarly, the Institute for Supply Management (ISM) report showed that the US Manufacturing PMI for March unexpectedly reached 50.3, surpassing the forecasted level of 48.5 and the February reading of 47.8. 

These developments contribute to positive expectations regarding energy consumption in the world's two largest economies.

Yuanta Securities Vietnam said that oil prices are likely to continue expanding to higher levels, with a midterm expectation of $95.35 per barrel, as OPEC and its allies, including Russia, also known as OPEC+, kept oil supply policy unchanged on Wednesday amid political tensions in Ukraine.

Based on the monthly chart, Yuanta Vietnam reported that the Oil and Gas Services group index is currently in the third wave of a robust and prolonged upward trend.

The securities firm told investors to prioritise buying and holding positions.

Given their supportive factors and the strong performance of oil and gas companies, analysts see PVDrilling (PVD) and PetroVietnam Technical Services Corporation (PVS) as two noteworthy stocks in the industry. 

Particularly, PVS stock has emerged as a promising name after surpassing a remarkable peak on April 1 and continuing its ascent to a new milestone of VNĐ43,700 per share on April 2, following positive oil price news.

The gain also helped PVS's market capitalisation reach a new record of nearly VNĐ20 trillion, up 63 per cent in just one year, making it the most valuable stock on the Hà Nội Stock Exchange (HoSE). The company ended Thursday at VNĐ42,900 a share.

Its strong rallies were driven by the company’s impressive business performance last year. 

PVS’s audited consolidated financial statements showed that the company’s net profit increased by 12 per cent year-on-year in 2023 to VNĐ1.06 trillion, the highest since 2016. This marked the first time since the period of 2014-2015 that PVS’s profit has exceeded VNĐ1 trillion.

The long-term focus is on the mega-project Lot B - Ô Môn with a scale of $12 billion. The project is expected to significantly boost the domestic oil and gas industry as well as PVS.

In a recent report, Vietcap Securities (VCSC) increased the target price for PVS shares by an additional 12 per cent to VNĐ47,800 per share. 

For PVDrilling, VCBS forecasts a 15 per cent growth in revenue to VNĐ6.75 trillion in 2024 compared to 2023. The net profit after tax is expected to be VNĐ559 billion, reflecting a 3.5 per cent increase. — VNS

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