Indonesian crude prices (ICP) reached US$67.18 per barrel in December - Photo: Special

JAKARTA (TheInsiderStories)Indonesian crude prices (ICP) reached US$67.18 per barrel in December, increase $3.92 from $63.26 per barrel in the previous month, the energy and mineral resources ministry has reported on Wednesday (01/08).

This is the highest figure since May, mainly driven by OPEC countries agreed to extend and increase oil production cuts by 500,000 barrels per day to 1.7 million barrels per day starting this year. The ICP SLC also increases to $67.61 per barrel, rising $3.97 from $63.64 per barrel.

“The increased prices are also supported by trade agreements between the United States (US) and China that encourage global economic growth. So that the demand for crude oil increases,” the ministry noted.

Coupled with the US Federal Reserve‘s policy to hold interest rates, the global economic projections are getting better. The market also responded positively to the weakening of the exchange rate of the US dollar against the Euro and the Pound Sterling, thereby encouraging investors to move investment into the commodity exchange. In addition, the need for crude oil in winter and the end of the year increases. Another supporting factor is the decline in US oil stockpiles, it said.

Based on the Energy Information Administration (EIA) report on Tuesday, US crude stockpiles in December 2019 amounted to 441.4 million barrels compared to the previous month of 5.7 million barrels.

The IEA also noted an increase in global crude oil demand in the fourth quarter of 2019 by 500,000 barrels per day compared to the second quarter of last year due to improved growth in demand for crude oil in OECD countries.

In addition, Iranian production fell to the lowest level since 1998 to reach 2.13 million barrels per day due to US sanctions. Finally, the decline in the number of US oil rigs to 663 rigs is the lowest number since March 2017.

“This is supported by an increase in oil processing in a number of US refineries at the end of the year due to tax provisions that encourage the minimization of crude oil storage stockpiles,” said the Indonesian Oil Price Team.

Meanwhile, the American Petroleum Institute (API) reported Tuesday a decrease of 5.945 million barrels of crude oil in the US crude oil inventories for the week ending Jan. 3.

The API reported a drop of 7.8 million barrels of crude oil inventories for the previous week ending Dec. 27, and the EIA reported a loss of 11.5 million barrels. Oil prices declined on Tuesday as investors’ concerns over geopolitical tensions in the Middle East eased.

The West Texas Intermediate for February delivery declined $0.57 to settle at $62.70 a barrel on the New York Mercantile Exchange. Brent crude for March delivery decreased $0.64 to close at $68.27 a barrel on the London ICE Futures Exchange.

For the Asia Pacific region, the increase in crude oil prices was influenced by China’s crude oil imports, which reached a record high as the operation of the teapot refineries was maximal to spend the year’s import quota. That way, China will increase the quota of oil imports this year.

In addition, demand for crude oil rose very rapidly, in China at 5.5 percent per year and India at 5.1 percent per year. While oil demand in the US has only risen 0.5 percent per year in the last decade.

“The increased prices in the region are also supported by an improvement in Japan’s JERA Power Utility which has led to increased demand for fuel oil during the winter and an increase in the China Manufacturing Purchase Manager Index which makes market participants hope for improvement in the country’s economic growth,” the team explained.

It reported the average major crude oil in international markets includes Dated Brent rose by $4.00 per barrel to $67.02 per barrel from $63.02 per barrel. WTI (Nymex) went on $2.73 to $59.80 from $57.07 per barrel. OPEC basket up by $2.63 to $65.58 from $62.94 per barrel. Brent (ICE) rose by $2.46 to $65.17 from $62.71 per barrel.

Written by Lexy Nantu, Email: lexy@theinsiderstories.com