Energy

Energy

 

- Crude oil prices to rise from now on  

Crude oil prices have advanced by over US$4/barrel in one month. Dubai, NYMEX, and Brent crude oil prices have made the peaks of 2015 at US$63.36/barrel, US$59.54/barrel, and US$64.29/barrel, respectively, mainly due to the following contributions: 1) Crude oil production from the US has decreased; and 2) The International Energy Agency (IEA) revised up crude oil demand in 2015 by 0.09 million barrels/day to 93.6 million barrels/day, mainly in 2H15. These two factors have relieved the oil oversupply problem, so the oil prices are expected to rise in 2H15. In addition, oil production from the Middle East has also been depressed for the short term by the conflict in the Middle East. 

- Revise down oil price assumption to reflect actual price  

We revise down Dubai crude oil price assumption from US$70/barrel to US$63/barrel in 2015 to reflect YTD average Dubai crude oil price of US$55.74/barrel. Crude oil price is expected at US$70/barrel on average for the remainder of the year. We lower Dubai crude oil price assumption from US$80/barrel to US$75/barrel next year as well. In addition, we revise down PTTEP's sales growth projection from 6%yoy to 3%yoy or 0.33 million barrels/day. Under the new assumption, PTT and PTTEP's new earnings forecasts and fair values are shown in page 3. 

- PTTEP, PTT's new fair values imply 16% upside  

We reiterate NEUTRAL for the petroleum sector. Under the new forecast, PTTEP and PTT's FY2015 fair values are revised down from B140 and B402.5 to B125 and B394, respectively. We reiterate BUY since the prices have considerably absorbed the negative factors already.