Khalid A. Al-Falih, Saudi Arabia's Minister of Energy, Industry & Mineral Resources and Chairman of the JMMC (r); with HE Mohammad Sanusi Barkindo, OPEC Secretary General - Photo by OPEC

JAKARTA (TheInsiderStories)–Crude oil prices surged to the highest level since 2014 on Wednesday (26/06) after United States (U.S) crude stocks fell to the lowest level in nearly two years.

West Texas Intermediate (WTI) crude for August delivery rose 3.2 per cent or US$2.23 and closed at US$72.76 per barrel (bbl) on the New York Mercantile Exchange. Meanwhile, Brent oil futures for August contract rose $1.31 and closed at $77.62 on the London-based ICE Futures Europe exchange. The global benchmark crude is at a premium of $4.86 compared to WTI.

The Energy Information Administration (EIA) noted the U.S crude inventories fell 9.89 million bbl last week, as refineries pushed the oil production and export to the highest level. U.S domestic crude oil production reached 10.9 million barrels per day (bpd) last week, unchanged from the previous week, according to EIA.

A day earlier, oil prices also surged amid reports that the US State Department said it would push companies to fully cut all oil imports from Iran in November. The risk of reduced oil supplies from Iran and Venezuela has pushed oil prices up. Even members of Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC Russia signal to raise the oil production could not maintain the price.

OPEC country members on Saturday (23/06) agreed to raise oil production starting next month. However, OPEC did not provide a clear drop target so it is difficult to calculate additional oil production.

Saudi Arabia said the decision would raise oil production by 1 million bpd or 1 per cent of global supply. However, Iraq said the increase is only about 770,000 bpd as some countries that have made production cuts will struggle to increase production.

This increase of production will end supply control amid concern that price rally has gone too far at $80.50 per barrel earlier in May, the highest since 2014. The production cut implemented since 2017 to boost the oil price that touched below $30 per barrel in 2016.

The oil price is still far above the 2018 state budget assumption of $48 per barrel. Finance Minister Sri Mulyani Indrawati earlier said an increase by $1 per barrel in oil price could raise state revenue by Rp1.1 trillion.

With the current price of $80 per barrel, Indonesia is highly likely to surpass the current oil & gas revenue target of Rp83.5 trillion. It consists of Rp80.3 trillion tax revenue and Rp3.2 trillion of non-tax revenue.