Strategy to invest in oil and gas stocks based on trend of worldwide prices

July 07, 2022 | 08:00
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Although oil and gas stocks remain hot amid market volatility, they are still vulnerable to the development of global price fluctuations affected by many unpredictable factors.
Strategy to invest in oil and gas stocks based on trend of worldwide prices
Strategy to invest in oil and gas stocks based on trend of worldwide prices, illustration photo

At a talk show on selecting stock portfolios organised by VIR last week, Hoang Viet Phuong, director of Analysis at SSI Securities, said that liquidity has decreased considerably over the past few weeks, sparking concerns about cash flow.

“There has been an obvious decline in the participation of investor groups who speculate or manipulate stocks. Secondly, investors have become more hesitant and worried about the risks in the stock market following its recent dip,” Phuong said.

As the VN-Index surpassed the 1,200-point mark, experts have predicted that the market will undergo fluctuations, presenting certain difficulties to investors, especially short-term ones. “We expect the market to go sideways in anticipation of a recovery in the market,” Phuong said.

In the third quarter, sectors related to commodity prices or supply chain disruption – such as oil, gas, and marine logistics – are expected to post positive earnings. Other sectors are predicted to experience shrinking profit margins due to rising input costs.

Bui Ngoc Duong, general director of Binh Son Refining and Petrochemical JSC (BSR), said that the company is maintaining its production continuity to achieve maximum profits. Despite the predictions of an eventual dip in oil prices, the company expects that prices will be good in the third quarter of the year. This is a positive factor for BSR to develop its operation scenarios for the rest of the year.

“Resolving the Russia-Ukraine conflict will help ease oil prices and balance supply. Previously, oil and petroleum products were transported from the Middle East to Central Asian countries. The US can now become an exporter of oil and petroleum products to Europe to replace Russian supplies in shortage,” Duong said. “With current predictions, we are building scenarios to maintain good growth in the third quarter. Maybe, the fourth quarter will follow a downward trend compared with the present.”

Commenting on the long-term prospects of oil and gas stocks, SSI’s Phuong said that the situation is complex. “We can only predict that oil prices will be high in at least half a year or beyond until supply rises enough to meet demand. Meanwhile, China has yet to open its borders, prompting higher oil demand. In 2023, oil consumption could slow down as the economy is likely to slip into recession,” Phuong explained.

She suggested investors trade oil and gas stocks in the short term following the development of oil prices. “Due to market volatility, it is important to have risk control strategies. Investors should not hold stock prices with disadvantageous fluctuations or sharp declines against their expectations,” Phuong said.

“In the long term, investors need to closely watch daily fundamental factors like supply and demand, as well as price fluctuations, to justify the positive trends of oil prices in the coming time. For instance, oil prices in the third quarter may decrease from the previous quarter but are still at a high level compared to the same period last year. In this scenario, corporates are expected to have better profit outlooks. Moreover, if compared with other industries with shrinking profits, this is still a positive point for oil and gas stocks,” she added.

By Thanh Van

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