Vietnam oil product prices slashed by highest margin since Jan 2016

By VnExpress   March 22, 2017 | 03:09 pm GMT+7

The government is trying to curb inflation in 2017, and lower fuel prices might help it meet the annual target. 

While Vietnam still has to rely heavily on imported products for most of its fuel needs, the price cut could help rein in consumer spending in the first quarter of 2017, after economists said it would be tough for the country to stay within its annual inflation limit of 4 percent this year.

Vietnam has reduced retail prices for fuel and oil products by up to 7.5 percent, the largest cut since January 2016, following drops in global oil prices, as the government seeks to tame inflation.

Annual inflation in January and February stood above 5 percent each month, based on government data.

The country imports two thirds of its oil products as output from its only refinery, the $3 billion Dung Quat plant, meets only 30 percent of domestic demand, even though it is running at full capacity.

Petrolimex, the country's largest importer and distributor of oil products, slashed 92-octane gasoline retail prices by 7.5 percent to VND17,310 ($0.76) per liter on Tuesday afternoon, the biggest cut on oil products since January 2016.

In January 2016, Petrolimex cut its retail prices for fuel oil by 7.6 percent. The company, with a nationwide sale networks, says it owns half of Vietnam's oil product market.

Hanoi-based Petrolimex also lowered retail prices for diesel, fuel oil and kerosene by between 4.2 percent and 5 percent in its second reduction this year. Its previous slight decrease took place on March 6. 

Tuesday's downward adjustments have been made "based on the actual price movements of oil products on the world market", Petrolimex said in a statement.

Global oil prices have fallen more than 10 percent since the year began on a high U.S. inventory, after making their largest annual rise last year since 2009.

Brent futures for May delivery closed around 1 percent down on Tuesday at $50.96 a barrel, a drop of 10.3 percent since the end of 2016. 

Economists and government officials have warned oil prices and natural disasters could make it difficult for Vietnam to achieve its annual inflation target this year, citing higher oil prices in 2016. 

Vietnam's fuel price cuts come before the 130,500-barrel-per-day Dung Quat refinery is shut for routine maintenance scheduled from June 5 to July 23, the third since operations began in 2011. 

Vietnam's imports of oil products are expected to increase in the coming months ahead of the maintenance work, while state oil and gas group PetroVietnam, the parent company of the refinery's operator, has already boosted output of fuel and oil products in the first months of 2017.

PetroVietnam estimated its output of oil products from January-March at 1.69 million tons, beating its own target for the quarter by 15.5 percent, VietnamPlus reported on Monday, citing a first-quarter production report from the group.

PetroVietnam has projected its output of oil products this year to ease by nearly 1 percent from 2016 to 6.8 million tons.

Vietnam has imported 1.63 million tons of oil products in the first two months of this year, up 0.2 percent from a year ago, Vietnam Customs data show.

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