background

Increasing demand worldwide Oil price close to $ 100?

Status: 23.06.2021 3:10 p.m.

Oil is more expensive than it has been in two years. Experts warn of a supply crisis: The prices for crude oil and thus also gasoline, kerosene and heating oil could soon rise much higher.

From Angela Göpfert, tagesschau.de

Oil prices hit new multi-year highs this week. For the first time in two years, a barrel (159 liters) of the North Sea Brent cost more than $ 75 again. For a barrel of the US West Texas Intermediate (WTI) variety, more than 73 dollars were paid on the market – the highest amount since October 2018. Rising oil prices – something that businesses and consumers may need to get used to. According to some experts, the new multi-year highs in oil prices, which many consumers are already feeling painfully at gas stations or when buying heating oil, are just the beginning of a longer upward trend in the oil market.

Analysts predict rising oil prices

The experts at the US investment bank Goldman Sachs expect the Brent price to rise to $ 80 this summer. But that is not the end of the story. An oil price of $ 100 is a “real possibility”. Alex Sanna, top oil trader at Glencore, the world’s largest commodity trading group, also said, according to the Financial Times, that an oil price of $ 100 is becoming increasingly likely.

The experts at JPMorgan even see a new oil super cycle looming and recently renewed their forecast of an oil price of $ 190 in 2025.

Demand congestion as a price driver

Francisco Blanch, raw materials expert at Bank of America, may not look quite that far into the future. For this he has the most precise 100-dollar forecast ready: the oil price could crack the round mark as early as 2022. The market hardly changes on the supply side – and this in turn is offset by an immense backlog of demand. It is easy to explain where this backlog of demand comes from: Just as many private households restricted their consumption during the pandemic, so too many companies put the necessary investments aside. Now that the global vaccination campaign is gaining momentum, at least in the major industrialized countries, consumers, companies and economies have a lot to catch up on.

Delta variant is a risk factor

The more relaxed Corona situation and the awakening global economy are leading to higher demand for crude oil, gasoline, diesel – and kerosene. Oil expert Blanch sees the rising travel industry as a major price driver.

The delta variant of the virus from India, which could lead to a further tightening of the corona measures, is currently also posing a risk to the economy.

Signal of a shortage of supply

In search of signs of whether demand is actually exceeding supply at the moment, it is worth taking a look at the market for so-called oil futures. Current oil futures contracts are quoted there higher than contracts with delivery at a later point in time. Such a constellation, referred to by experts as “backwardation”, is rather unusual and a clear indication of fear of scarcity – “and thus for further rising prices”, as market expert Robert Rethfeld from Wellenreiter-Invest emphasizes.

A price corrective called fracking

The rising prices should actually make re-entry into the oil market attractive for the US shale industry. In the past, the US frackers acted as flexible price correctors on the oil market: If prices rose, more shale oil was drilled in the short term, supply increased, prices fell again.

As a reminder, the last time oil traded above $ 100 was in 2014, when a rapidly growing supply from the US fracking industry brought an abrupt end to the last oil super cycle.

Sustainability trend slows US oil industry

But this mechanism doesn’t seem to work that well anymore. This is due on the one hand to the new US President Joe Biden, who imposed a stop on oil and gas drilling on state-owned land in January, and on the other hand to the global trend towards sustainable investment.

“The number of active US oil wells is increasing only slowly,” emphasizes wave rider expert Rethfeld. “The investors do not want to see an expansion of the production capacities at the moment, but instead demand investments in renewable energies.”

Iran as a risk factor

The production countries of the OPEC + oil cartel, especially Saudi Arabia and Russia, could benefit from the West’s climate policy. It remains to be seen how willing they are to expand production to fill the void left by the US oil industry.

Especially since there are supply risks on the part of OPEC: “After the election of an ultra-conservative cleric as the new president, Iran will have a hard time overturning US sanctions and increasing oil exports,” said Eugen Weinberg, raw materials expert at Commerzbank .

Inflation Risks Before Revaluation?

Should the oil price actually rise further towards 100 dollars, this would inevitably lead to a reassessment of the inflation risks in the financial markets, since the oil price is one of the main drivers of consumer prices.

Just yesterday, Jerome Powell, head of the US Federal Reserve (Fed), told the House of Representatives budget committee again that the Fed was considering the current high inflation rates a temporary phenomenon considered. However, market expert Rethfeld emphasizes: “Any oil price above $ 100 would suggest to the public that Powell is wrong.”

Opec Plastics Joint Stock Company, also known in English as Opec Plastics, is headquartered at 13th Floor, BIDV Tower, 194 Tran Quang Khai, Hanoi. The history of the enterprise stretches with important milestones since 2002 as follows: 2002 year Asia Plastic Factory was established and built in Nhu Quynh industrial cluster, Hung Yen province. 2004 Established subsidiaries, namely Dong A AID and Nam A AID, specializing in supplying raw materials for production and distributing products for Asia Plastics Factory. 2006 – 2008 Won Gold Cup for Vietnamese Products, Gold Cup for Environmental Protection, WTO-compliant Products on Intellectual Property, Competitive Trademark. 2009 Established Opec Plastic Joint Stock Company (Opec Plastics., JSC), acquired Asia Plastic Factory. Year 2010 – 2011 The company invests methodically with large capital, senior personnel from abroad, business strategy highly focuses on the value chain and supply chain of the plastic – chemical industry. Year 2012 Put the new factory into operation, in Pho Noi A Industrial Park, Hung Yen province, specializing in the production of export PE packaging. The company became a strategic partner of Dung Quat Oil Refinery, distributing most of PP plastic products for the Plant. 2013 With its position as one of the leading plastic enterprises in Vietnam, with professional management, Opec Plastic continues to expand production and business, create more jobs for workers, and ensure the living standards of the people. employees. Year 2014 to present As the Top Plastic Enterprise in Southeast Asia, the largest plastic resin distributor in Vietnam and Southeast Asia, Opec Plastics always strives to connect and support Plastic enterprises in Vietnam and in the world. world in order to create added value for the parties through win-win and sustainable cooperation. In addition, Opec Plastics is also known as one of the leading manufacturers of biodegradable packaging in the country. Opec Plastic Joint Stock Company is growing and expanding In addition to the head office in Hanoi, Opec Plastic Joint Stock Company also has representative offices and many logistics centers in 3 North – Central – South regions, and representative offices in the United States, Singapore, Indonesia, the Philippines, and China. Quoc, Dubai … have factories producing plastic packaging for export with a total area of ​​​​nearly 10 hectares in Pho Noi A Industrial Park, Hung Yen and at Km 56, Highway 5, City. Hai Duong. These achievements have helped Opec Plastics rank 40th in the Top 100 Largest Private Enterprises in Vietnam and 91st in the Top 500 Largest Enterprises in Vietnam in 2020. As can be seen, the business has completely confirmed it. Top position in Vietnam plastic industry in both depth and breadth. Branch system and factories of Opec Plastic JSC HANOI OFFICE at 13th floor, BIDV Tower, 194 Tran Quang Khai – Ly Thai To Ward, Hoan Kiem District, Hanoi. HO CHI MINH CITY BRANCH at Lot L12A-16, Floor 12A, Vincom Center Dong Khoi Building, 72 Le Thanh Ton, Ben Nghe Ward, District 1, HCMC. CENTRAL BRANCH at Building C1-13, Van Tuong Binh Son Urban Area, Quang Ngai. HAI PHONG BRANCH at Room 703, 7th Floor, LP Builing, No. 508 Le Thanh Tong Street, Van My District, Ngo Quyen District, Hai Phong City, Vietnam. FACTORY 1 at Lot 16, Street 206, Zone A, Pho Noi A Industrial Park, Dinh Du Commune, Van Lam District, Hung Yen Province. FACTORY 2 at Km 56, National Highway 5, Nam Dong, Hai Duong City, Hai Duong Province. How does Opec Plastic Joint Stock Company do business?Continuously increasing capital Formerly known as Asia Plastic Factory, established in September 2009, Opec Plastic Joint Stock Company, formerly known as Asia Plastic Factory, operates mainly in the field of manufacturing foam bags, plastic packaging, etc. plastic beads… with initial charter capital of 55 billion dong. This number is contributed by 3 founding shareholders, including Chairman of the Board of Directors and General Director Dinh Duc Thang (VND 30.25 billion); Mr. Nguyen Minh Tu (19.25 billion VND); Mr. Nguyen Duc Ha (5.5 billion VND). Up to now, through many capital increases, the charter capital of Opec Plastics has increased to VND 550 billion, 10 times higher than before. Total assets by the end of 2019 of Opec Plastics reached VND 7,210 billion, nearly double that of the end of 2016. Equity even reached VND 675 billion at the end of 2019, an increase of more than 8 times in the period. this time. With the ratio of liabilities to total assets regularly maintaining over 90%, most of Opec Plastic’s assets are still financed from debt capital, although this debt ratio is showing signs of decreasing. The business results of Opec Plastics are also significantly affected by the use of high leverage. Revenue far exceeds many “big guys” in the plastic industry Opec Plastic’s revenue grew strongly in the period of 2016-2019 during the expansion process, sometimes reaching double the figure of Tien Phong Plastic (code NTP) and Binh Minh Plastic (code BMP) combined and high much higher than the target of An Phat Xanh Plastic (code AAA), these are all “big guys” in the same listed plastic industry. Specifically, in 2019, Opec Plastics grew 11.5% compared to 2018 when it recorded VND 16,162 billion in revenue. The record revenue that An Phat Xanh Plastic, another big player in the industry, achieved in 2019 is 9,258 billion VND, which is only about 57%. Profits eroded by leverage In 2019, net profit decreased by 64% compared to the previous year when this business only earned 37 billion dong in net profit. With 1,000 dong of revenue, it brought in just over 2 dong of profit, equivalent to a net profit margin of only 0.22%. Profit margins of Opec Plastics are only low because profits cannot keep up with capital raising process. In 2019, the return on equity (ROE) was only approximately 5.5%, and the return on assets (ROA) was only 0.5%.

Brent oil price increased for 4 consecutive sessions on June 15. Photo: Reuters Ending the session on June 14, Brent oil price advanced 17 US cents to 72.86 USD/barrel. The price of this oil commodity at the beginning of the session jumped to $73.64 per barrel – the highest level since April 2019. The price of WTI oil fell 3 US cents to 70.88 USD/barrel, after touching $71.78/barrel at one point, the highest level since October 2018. The price of “black gold” has increased sharply in recent weeks thanks to a gradual recovery in demand for fuel in the context of many countries easing restrictions to prevent the Covid-19 epidemic. The International Energy Agency (IEA) on June 11 forecast that global demand will return to pre-pandemic levels by the end of 2022, faster than previously predicted. The IEA called on the Organization of the Petroleum Exporting Countries (OPEC) and its allies, collectively known as the OPEC+ group, to increase supply to meet demand. The OPEC+ group has limited output to support oil prices after the Covid-19 pandemic caused demand to drop to a record in 2020. Indirect discussions between the US and Iran, and the remaining powers in the 2015 Iran nuclear deal, resumed on June 12 in Vienna (Austria). However, the European Union (EU) described this round of negotiations on the multilateral nuclear deal as “tense”. The US return to the Iran Nuclear Agreement, also known as the Joint Comprehensive Plan of Action (JCPOA), would pave the way for the lifting of economic sanctions on Tehran, thereby allowing the OPEC member This continues to export crude oil. However, financial consulting firm ING Economics said that the possibility of the US rejoining the JCPOA before the Iranian presidential election this weekend is very unlikely. Regarding supply, the OPEC + group recently decided to maintain the production agreement to support oil prices in the middle of the epidemic season. According to ING, additional supply from the OPEC+ group will be needed in the second half of the year, as demand is expected to continue to recover. However, the rally of oil prices in the session was also limited as investors cautiously waited for the outcome of the policy meeting of the US Federal Reserve (FED) from 15-16/// 6 to look for signals on when the central bank will begin to scale back its monetary stimulus measures.