Rising oil prices to benefit growth

On October 10, 2018, on the London market, the average price of Brent oil rose to US$85.17 per barrel for December contracts, and the average price of WTI oil climbed to US$75.07 per barrel for November contracts.

The 30% price climb since early this year followed the US sanctions on Iran and a fear of global supply shortages sparking a debate over the possibility of US$100 Brent. These prices are for contracts of November 2018.

The Ministry of Finance yesterday reported that Vietnam’s total state revenue from crude oil exports is estimated to hit VND6.5 trillion (US$287.6 million) in September, and VND48.1 trillion (US$3.13 billion) for this year’s first nine months, up 42.5% in comparison to the same period last year.

It is estimated that an increase of US$1 in crude oil exports will bring in roughly VND1 trillion (US$44,24 million) to Vietnam.

Vietnam’s crude oil export turnover decreased from US$2.93 billion in 2015 to US$2.35 billion in 2016. However, the figure slightly bounced back to US$2.87 billion last year.

It is expected that Vietnam will export approximately 11.23 million tonnes of crude oil, lower than the 13 million tonnes last year.

Key export markets include China, Thailand, Australia, the US, Japan, Singapore, and Malaysia.

Under a recent a draft scenario on economic growth for 2018, issued by the Ministry of Planning and Investment (MPI), an average price of US$65 per barrel is forecast for the whole of 2018. Based on the specific developments of the oil price, the government can decide on a climb in exploiting more crude oil.

Moreover, if the crude oil price hovers at an average of US$65 per barrel this year - higher than last year’s average of US$60 per barrel – the economy will grow higher than the 6.7% rate previously set by the National Assembly.

However, international organisations have forecast that the average oil crude price this year is expected to hover at US$70-80 per barrel. Therefore, it will likely push up the petrol price in Vietnam by 5-15% and may increase inflation by 0.28-0.64% for the whole of 2018.

In fact, Vietnam’s fuel prices are significantly impacted by developments in the world’s oil prices because the country is a net importer of fuel. Around 70-80% of its needed fuel is imported, mostly from Singapore, the Republic of Korea, Malaysia, China, and Thailand.

According to Vietnam’s General Department of Customs, in 2017, Vietnam imported 12.86 million tonnes of assorted petrol worth US$7.04 billion, up 9.4% in volume and 38.3% in value, as compared to 2016.

In this year’s first nine months, the government has increased the price of A5 petrol eight times, with a rise of VND2,440 (US$0.1) per litre, and the price of diesel has been raised 10 times, with a climb of VND2,960 (US$0.13) per litre. These increases have pushed up the average price of petrol in this year’s first nine months by 15.57% in comparison to the same period last year, and also contributed to a hike of 0.69% in the consumer price index in this period.

The government expects that the consumer price index for 2018 will be below 4%.

In this year’s fourth quarter, a new field called Ca Tam will officially come into operation.

In this year, the oil and gas industry will continue boosting the exploration, appraisal and exploitation of several oil fields including Plot B, Ca Voi Xanh (Blue Whale), and Ca Rong Do (Red Dragon Fish).