The Misfortune of Refinery Stocks, Pressuring by Price War, Covid-19, and Lower Price

The oil refinery stocks were in a dilemma once again after a series of negativities, causing the stocks to plummet. And it is only half a year into 2020.

 

Prior to this, the oil prices war between Saudi Arabia and Russia had dampened global oil prices. If that was not enough, the outbreak of coronavirus plunged the market even further and totally erased demand from the market, causing gross refinery margin to edge lower.

As the plummet from the coronavirus outbreak has yet to recover, the Energy Policy and Planning Office (EPPO) announced a revision of the rules for calculating the price in front of the new refinery (starting 17 June). Preliminary, the retail price is expected to drop by THB 0.50 per liter.

The negativities continue to hit stocks related to oil refineries in succession, not giving time to recover from previous wounds.

 

Star Petroleum Refining Public Company Limited (SPRC) is expected to be the one with the most severity as its business structures are all refining business. As for some of SPRC’s factory which might relate to olefin or aromatic, the damage would be lessened, depending on the portion of refinery sections.

The refinery business comprises 70% of Bangchak Corporation Public Company Limited (BCP)’s business, 65% for both Esso (Thailand) Public Company Limited (ESSO) and Thai Oil Public Company Limited (TOP).

Meanwhile, IRPC Public Company Limited (IRPC) has 35% of its business as refining and PTT Global Chemical Public Company Limited (PTTGC) has 25%, which would be the least to get hurt from all negativities.

 

Due to these reasons, the oil refinery stocks may not be able to show their best performance as anticipated in early 2020. More importantly, if the coronavirus outbreak continues, hopes for a recovery in demand this year would be very small.