In response to plunging oil prices, state-owned energy firm PTT Plc is urging policymakers to take action to cut the nation's crude oil reserve in half as prices dip below US$30 a barrel.
President and chief executive Chansin Treenuchagron said PTT will urge the government to reduce the volume of its oil reserve to 9-10 days worth of daily production for crude oil, down from the current volume of 18-20 days.
PTT wants refined oil volume to remain the same at four days worth of daily production.
The company expects to decrease its commercial oil reserve in order to stave off significant first-quarter losses from the tumultuous price war in the global oil market.
Over the weekend, Saudi Arabia shocked the global market by slashing its export prices to punish Russia for not reducing its oil production as a measure to help an oil industry staggering from the coronavirus epidemic.
The move drove crude oil prices below $30 a barrel in much of the world, leaving domestic oil producers in Thailand scrambling to respond.
A group that includes Thai Oil Plc, IRPC Plc and refining flagship PTT Global Chemical Plc already experienced losses in 2008 and 2014 from huge drops in oil prices -- first from the global recession and then from an oversupply of crude oil stemming from the US's shale resources.
The three oil refiners controlled by PTT in Thailand have a total refining output of more than 62% or 770 kilobarrels per day and total refining capacity of 1,234 kilobarrels per day.
"Although oil prices will decline, benefiting motorists, we have to manage the stock of crude oil to prevent huge stock losses again like in 2008 and 2014," Mr Chansin said.
PTT expects the situation to return to normal by the end of the first quarter.
Praipol Koomsap, former adviser to the Energy Ministry and an economist at Thammasat University, said the significant price drop will raise costs, especially for deep-sea operations, which could lead many oil producers in North America, Europe and South America to suspend production.
The drop in oil prices this week comes as many sovereign funds are moving away from the oil market to invest in higher-returning commodities and bonds.
Mr Praipol said one factor in the funds' exit from oil was that Saudi Arabia, which dominates the Opec producer group, and Russia, which leads the non-Opec producers, could not reach an agreement on cutting crude oil output.
Before the drop in oil prices over the weekend, there was already a massive global surplus of oil supply because of the coronavirus outbreak restricting travel and fuel usage.
The epidemic has driven global oil prices lower as some countries shut down land and aeroplane transport, further reducing oil demand, he said.
"I think the low prices may last over a month if oil-producing nations cannot come to an agreement to cut production," said Mr Praipol.
The drop in global oil prices started last Saturday when West Texas Intermediate (WTI) crude, a reference price, fell by 8.2% to $42.17 a barrel and Brent crude fell by almost 8% to $46.01 a barrel.
The WTI price tumbled a further 32% to $27.85 a barrel in yesterday morning's trading.
Mr Praipol said Opec members will consider cutting oil output again because Russia wants to delay an agreement to cut production.