SET oil stocks shift into rally mode

Oil stocks on the Stock Exchange of Thailand (SET) shifted into rally mode yesterday alongside global oil stocks as Brent crude oil prices rose to a 14-month high above US$70 per barrel, after Saudi Arabia’s oil supply had been attacked on Sunday.

Other positive factors boosting the overall market sentiment include the improvement in US non-farm payroll and employment rate, as well as a 60% increase in Chinese exports in February, giving investors hopes of a swifter global economic recovery, said Wanapruk Komonwitayatorn, Asia Plus Securities’ (ASPS) fundamental investment analyst on securities.

Brent crude oil immediately surged after there was a report that the global oil supply will decline 7% due to the attack, followed by oil stocks listed on the Thai stock market which also jumped on the news.

The surge in oil stocks significantly raised the SET Index as energy stocks contribute to a large portion of the SET.

Mr Wanapruk said stocks of PTT group, including PTT Plc (PTT), PTT Exploration and Production (PTTEP) and PTT Global Chemical (PTTGC), pose the highest potential for upside as the prices are still cheap compared to their competitors in the global market.

However, oil prices had rallied ahead of the Saudi oilfield attacks, as there were signs of a global economic recovery having upside on earning forecasts and stocks fair values.

Mr Wanapruk said the US nonfarm payroll and unemployment rate have fared much better than analysts expected.

The better outlook for the US economy, including the Senate’s approval of a $1.9-trillion stimulus package, has greatly boosted the market sentiment.

Takrit Chardcherdsak, fundamental

investment analyst at ASPS, said another factor supporting global stock markets is the sign of improvement in international trade, as reflected in China’s exports that beat the projection.

China’s exports in February surged 60% while imports grew 22% from the same period in 2020.

The baht also weakened as the US dollar strengthened, boosting positive sentiment among Thai exporters such as Charoen Pokphand Foods Plc (CPF) and Thai Union Group Plc (TU).

Thanks to the upcoming adoption of vaccine passports and investment stimulus measures, a new round of private investment is also expected, benefiting industrial estate players such as Amata Corporation Plc (AMATA) and WHA Corporation Plc (WHA).

For the Thai bourse, another positive factor is the prime minister’s remarks that the government is considering allowing the celebration of Songkran.

If the Songkran celebration is allowed, it will significantly spur the economy and tourism after being cancelled in 2020 due to the pandemic, said Mr Takrit.

In addition to the Songkran festival, the vaccine passport policy will also support tourism stocks as it will significantly increase international transport.

Oil experts say the surge in global oil prices will be short lived because the crude oil supply from shale oil resources in North America will resume production and cause an oversupply like in 2014, according to Pitak Ratchakitprakarn, president of SET-listed PTG Energy Plc (PTG).

Mr Pitak said if global oil prices rise above $60 per barrel for an extended period, shale oil production in North America will resume as well as surplus crude oil production.

“As local oil traders, we have legal oil in our inventory for as much as five days’ usage and another commercial inventory of oil tanks underground at oil stations nationwide so this situation is expected to have no impact on PTG business in the short term,” he said.

He said the situation will calm down soon and the average oil price would stand at $58-65 per barrel.

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If global oil prices rise above $60 per barrel for an extended period, shale oil production in North America will resume as well as surplus crude oil production. PITAK RATCHAKITPRAKARN President, PTG