JAKARTA (TheInsiderStories) – The Organization of the Petroleum Exporting Countries (OPEC) has forecast that the global oil prices will continue to remain stable in 2018. Global oil prices could recover to around US$70 per barrel following the cuts.
Currently, the global oil prices of West Texas Intermediate were recorded at $63.31 per barrel, while Brent oil was priced at $66.63 per barrel. While, the price of OPEC basket of fourteen crude stood at $63.97 a barrel on Feb. 28, compared with $64.99 the previous day, according to OPEC Secretariat calculations.
Based on Energy and Mineral Resources Ministry (EMR) data on March 1, OPEC has succeeded in trimming oil production by 1.8 million barrels per day since 2016. This effort was undertaken to handle the oversupply of oil that has caused the global oil prices to plummet since 2014.
OPEC leader Suhail al-Mazrouein remarked that this price stability is triggered by the level of compliance of OPEC members. Until January 2018, the recorded compliance rate on production cuts had reached 133 percent.
In addition, OPEC has continued to strengthen cooperation with oil-producing countries outside the OPEC to maintain global oil prices and the market share.
The OPEC has projected that the global oil demand will continue to increase in the next few years. al-Mazrouein noted OPEC need to add 15 million barrels per day to meet the needs in 2040.
OPEC Member Countries in a concerted effort to accelerate the stabilization of the global oil market through voluntary production adjustments of around 1.8 million barrels per day.
This solid performance during the first month of the second year of the Declaration of Cooperation continues a remarkable upward trend seen throughout 2017, and demonstrates the commitment of participating countries to the restoration of market stability, in the interests of producers, consumers and the global economy.
The Joint OPEC-Non-OPEC Ministerial Monitoring Committee (JMMC) member expressed satisfaction with the overall results, but noted the recent market volatility, stressing the importance of vigilance and the need to avoid complacency.
The JMMC also noted that performance was not uniform and that conformity was boosted by several over-performing countries, and therefore urged all participating countries to continue and, to the extent possible, intensify their collective and individual efforts, in order to expedite the rebalancing of the oil market.
Throughout 2018, the JMMC will focus on striving to maintain or exceed full conformity by all participating countries. The next meeting of the JMMC will take place in Saudi Arabia, in April.
Global oil prices are one of the factors taken into account while formulating the Indonesian Crude Oil Price (ICP) issued by the Ministry of EMR through the Directorate General of Oil and Gas in the first week of the following month.
As is known, the assumption of the price of ICP in the State Budget 2018 is set at $48 per barrel. The ICP price in January 2018 had reached $65.59 per barrel, and the average ICP price in 2017 was recorded at $51.19 per barrel.
Then, will the government propose a Revised State Budget?
Finance Minister Sri Mulyani Indrawati admits the oil price and exchange rate have changed compared to what the government has set in the 2018 State Budget. However, changes in one month will not prompt the government to submit a revision of the 2018 State Budget to the House of Representatives.
Currently, she said, the government, in this case the Ministry of Finance, will continue to monitor the macroeconomic developments, including matters that are related with the basic assumptions that have been stated in the 2018 State Budget.
The basic macroeconomic assumptions in State Budget of 2018 are set as follows; economic growth was set at 5.4 per cent, inflation rate at 3.5 per cent, the rupiah exchange rate was set at Rp 13,400 per US$, BI 7 Days Repo Rate 5.2 per cent and crude oil price or ICP US$ 48 per barrel. While oil lifting was set at 800,000 barrels per day and gas lifting of 1.2 million barrels of oil equivalent.
The steadily rising of global oil price is expected to stimulate the State Budget revenues next year, according to Indrawati. With a total revenues target of Rp1,894 trillion ($132.5 billion), the government expects to achieve 10.1 per cent growth in oil and gas tax revenues next year.
Oil prices rose amid an ongoing North Sea pipeline outage and signs that booming US crude output growth may be slowing, although the 2018 outlook points to ample supply despite production cuts led by OPEC.
Global research Goldman Sachs raised its Brent crude price forecasts on Thursday, saying oil markets have rebalanced six months sooner than expected, citing steady demand growth and continuing compliance with OPEC-led supply cuts. The bank’s three, six and twelve-month Brent oil price forecasts were raised to $75, $82.50 and $75 a barrel respectively, from $62 previously.
The current price of CPI has surpassed government estimates. In the 2018 State Budget, the Indonesian government set its oil price assumption at $48 per barrel. With that budget assumption, the risk is clearly towards a higher subsidy bill if there is resistance to altering retail prices ahead of key elections.