Oil Inches Down as OPEC+ Decides to Boost Supply

OPEC+ members decided to gradually increase supply at a time when the resurgence of the delta variant is still prominent globally and major U.S. refiners are offline.

The organization plans to add 400,000 barrels per day (bpd) each month. The U.S. had a reservation on the organization to increase supply citing global recovery. Earlier on Wednesday, the organization revised the demand for 2022 to 4.20 million bpd which earlier was 3.28 million bpd.

However, it is to question if demand and supply would meet the organization’s target level given delta variant being dominant along with low vaccination rates in majority of the countries globally.

According to the Energy Information Administration (EIA), crude oil inventories in the U.S. dropped by 7.2 million barrels whereas the supply of petroleum products increased to record high.

 

PTG in Context

Management of PTG Energy PCL. (PTG) stated although domestic demand for oil dropped by 15-20% during July- August 2021, the sales volume of the company contracted just by 8-10% YoY outperforming peers. According to the management, although domestic demand will soften the impact of the third wave of COVID-19 effect will be smaller in non-oil business.

The company maintains its annual growth capital expenditure (CAPEX) of 2022 at around 5 billion baht. Collaborating with the Electricity Generating Authority of Thailand (EGAT) , a plan is underway to increase the number of EV charging stations from 5 branches to 36 by the first quarter of 2022.

Besides, PTG’s management also plans to spend growth CAPEX of 500 million – 1 billion baht in new businesses including renewable energy, healthcare, e-money and other technology business.

Earlier Kasikorn Securities (KS) maintained outperform recommendation with a target price of 20.50 baht with an upside of 12.64%. The stock is trading at 18.10 baht down by 0.10 baht with 25% above the 3-month historical premium.