‘The Oil and Gas industry in the whole world has recently encountered an imbalance in supply and demand. However, with the news of oil supply expansion from OPEC+, is this a good sign of the cooling down oil prices?’

Global market: Demand recovers

The world oil market witnessed an unprecedented decline in the first half of 2020 when the price of light crude oil (WTI) fell to zero. Since the second half of 2020, oil prices have recovered while the Covid-19 epidemic was gradually under control, helped oil demand to increase.

The price of WTI oil has consecutively increased for 7 months from December 2020 and surpassed the threshold of 71 USD/barrel (in June 2021). The average oil price of WTI 2021 also increased significantly at 61.94 USD/barrel compared to the average of 39.23 USD/barrel in 2020. According to experts, the increase in oil price largely comes from OPEC + output tightening.


In the latest meeting of OPEC+, the proposed additional supply of 2 million bpd, would be significantly less than the demand of the oil market as demand is rising again to an average of 5.95 million bpd.

On July 25, 2021, at the end of the weekend trading session, the prices of both Brent and WTI increased slightly. WTI oil placed at 71.17 USD/barrel (up 0.14%). Brent oil was at 74.19 USD/barrel (up 0.12%). Thus, during the week, Brent oil gained 0.7%, ending the previous 3-week losing streak and WTI oil also gained 0.4% after falling in the previous 2 weeks.




Vietnam market

Exploiting –  consumption of crude oil continues on a downward trend


Crude oil output in the first 6 months of 2021 is estimated at 4.6 million tons, down 7.3% yoy. In the period of 2015 – 2020, crude oil output continuously decreased with an -10.4% CAGR. In recent years, upstream enterprises such as VSP, East Sea POC, and Rosneft, etc have not increased their reserves as well as discovered new mines. Therefore, the total output has gradually decreased. As for the existing fields, the oil reserves near the shore are almost depleted.

Experts assess that the current high oil price momentum can promote oil and gas exploration and production activities in Vietnam, providing potential job opportunities for upstream enterprises.

Domestic petrol prices maintain a stable increase

Affected by world prices, domestic petrol prices increased sharply according to the general rules of the market. At the end of June 2021, the Inter-Ministry of Industry and Trade – Finance adjusted petrol prices. The selling prices of popular petroleum products on the market are as follows:



From the beginning of 2021, under the impact of world petrol prices, the domestic retail price of petrol has kept a stable growth after 6 times of adjustment. From the first adjustment on January 26, 2021 to the last adjustment on June 26, 2021:



Factors affecting world oil prices

Positive oil demand



World oil demand has grown strongly in 2021 thanks to the recovery of the global economy; vaccination implemented as well as borders opening. According to the IMF report, global economic growth is forecast to reach 5.4% in 2021. Developed economies performed more positively compared to 2020 thanks to the promotion of monetary and fiscal policies. As the plan, the majority of the population in the developed economies will be vaccinated against the coronavirus. The stressful situation due to the pandemic will be reduced.


As a result, oil demand in both OPEC and non-OPEC regions is forecast to grow positively in 2021. Although it cannot reach the pre-pandemic level, the total volume will average 96.46 million bpd during the year, which is still much higher than the 90.51million bpd in last year.



The International Energy Agency (IEA) in its April report forecast world crude oil demand in 2021 will increase 230,000 bpd from the previous month to 96.7 million bpd. China’s crude oil imports in Q1/2021 reached 139 million tons, up 9.5% yoy, gas reached 40.6 billion, up 19.6% yoy. The volume of crude oil imports from Iran into China from November 2020 to the end of March 2021 increased to an average of 557,000 bpd, or 5% of total import demand.

But not only in China but also in Europe, India… and especially in the US, fuel consumption demand is also showing a strong recovery. The latest monthly data from the US Energy Information Administration (EIA) shows that oil demand increased by 0.9 mbpd yoy in March 2021, after a decrease of 2. 4 million billion VND in February. The March 2021 diesel data also showed an increase of more than 0.1 mbpd yoy after falling about 0.1 mbpd yoy in February.



Loosened supply 


The OPEC group accounts for 40% of the world’s oil production and holds about 75% of the total reserves. On July 18, 2021, OPEC+ said that 23 members of the group had agreed from August to December 2021 to supply the market with an additional 2 million bpd, which means an increase in output by 400,000 bpd each month.

The OPEC+ agreement compliance rate (estimated by Argus) in June 2021 reached 111%, equivalent to crude oil production of 35.9 million bpd. An increase of more than 600,000 bpd compared to May was mainly due to the restoration of KSA (Saudi Arabia). KSA made an additional voluntary cut of 1 million bpd from February to April, gradually reduced to 400,000 bpd by June, and ceased from July.



Leave a Reply

Your email address will not be published.