IRPC rejects hype on oil glut

IRPC rejects hype on oil glut

It believes production will be cut to lift prices

Plunging oil prices have most oil analysts believing the worst is yet to come. But Thailand's integrated petrochemical producer, IRPC Plc, is more optimistic, saying the oil glut may ease soon with a possible cut of oil production.

Though most analysts expect oil prices to continue to tumble, IRPC is optimistic they will bottom out before rebounding next year as production is slowed.

"If major global oil producers can't bear the losses from low prices, they will cut capacity so the price range will rise to between US$80-90 per barrel in 2015," said IRPC's president Sukrit Surabotsopon.

Some oil and gas explorers are using complicated technologies to pump petroleum from deep-sea fields or oil sands.

The low oil price has trimmed the margins of petroleum producers significantly, which should lead to a production cut to ease oversupply tensions across the world, even though the biggest group of producers — Opec — stubbornly maintain they will keep production levels steady through mid-2015, said Mr Sukrit. 

"I don't think the current oil crisis will be as bad as 2008, when the price fell from over $140 a barrel to below $40 within a few weeks," he said. "It will bottom out for a while before moving up to its optimum level in 2015."

Previously national oil and gas conglomerate PTT Plc, IRPC's major shareholder, forecast prices of $90-$95 for next year but are now cutting their forecast because there have been no signs of a bottom yet, said Mr Sukrit.

Petrochemical producers of olefins and aromatics are expected to have huge gains with cheaper oil, although new producers could flood the market next year thanks to sturdy demand in Asia, he said.

Mr Sukrit said IRPC was maintaining its $304.87-million investment plan next year to expand its production capacity of polypropylene, part of a five-year outlay of $1.98 billion.

IRPC is also studying the viability of merging with PTT Global Chemical to improve cost efficiency and create business synergy. But the plan could take some time to materialise as both companies are making huge investments that could make their value uncertain during due diligence.

IRPC shares closed on the SET at 3.06 baht, down 18 satang, in trade worth 142 million baht.

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