Margins on Light Distillate in Asia-Pacific Widen, October ICP Set at USD38.07 per Barrel

MINISTRY OF ENERGY AND MINERAL RESOURCES

REPUBLIC OF INDONESIA

PRESS RELEASE

NUMBER: 349.Pers/04/SJI/2020

Date: 11 November 2020

Margins on Light Distillate in Asia-Pacific Widen, October ICP Set at USD38.07 per Barrel

The Indonesian Crude Price (ICP) of October picked up by USD0.64 per barrel from September ICP. The increase has been caused by higher margins to produce light distillate in the Asia-Pacific market.

Based on Decision of Minister of Energy and Mineral Resources Number 225 K/12/MEM/2020, the October ICP has been set at USD38.07 per barrel, increasing from the previous month ICP of USD37.43 per barrel.

Head of Bureau of Communication, Public Information Services, and Cooperation of Ministry of Energy and Mineral Resources (EMR), Agung Pribadi, said that this ICP increase was inconsistent with developments in global crude oil prices. "In fact, oil prices on the global market have decreased," said Agung in Jakarta on Wednesday (11/11).

Agung explained that the price of West Texas Intermediate (WTI) oil fell from USD39.63 per barrel to USD39.55 per barrel. Similarly, the price of (Dated) Brent was down from USD41.87 per barrel to USD41.52 per barrel. "Price decline also occurred to OPEC Basket and Brent (ICE), to USD40.25 per barrel and USD41.52 per barrel, respectively," he said.

One of the factors strongly influencing the movement of world's crude oil is market players' concern about rising Covid-19 cases in a number of countries, especially in Europe, leading to the reintroduction of lockdown and thus, diminishing the prospect of improving oil demand.

Meanwhile, news about the President of the United States tested positive for Covid-19 has also triggered lower prices, in addition to sluggish labor market in the US. Negotiation on the US fiscal stimulus package will continue after the presidential election.

Besides economic and political condition, the OPEC report for October 2020 has projected that global crude oil demand will decline by 9.5 million bopd while supply will increase by 310,000 bopd after US crude oil production recovers. US crude oil production surged to 11.1 million bopd, the highest since July, in a record weekly increase of 1.2 million bopd.

Baker Hughes reported oil rig operation in the US grew to its highest 221 oil rigs since May. Finally, stronger US Dollar exchange rate has attracted investors to shift their investment from the commodity market.

Other factors include continued production of crude oil from Norway after the strike of offshore oil & gas workers ended and an increase in OPEC+ supply, especially from Saudi Arabia and Russia, as well as increased production from OPEC countries exempted from production cut (Iran, Venezuela, and Libya).

In the Asia-Pacific region, in addition to the above factors, lower crude oil prices have been due to China's high stocks because the country bought a large amount of crude oil last spring, when prices were low.

"Declining rate of refinery operations in Asia, with operation rate in Japan dropping to 70% while in South Korea down to 60%, has also contributed to lower crude oil prices in the Asia-Pacific region," informed a member of the Indonesian Crude Price Team. (IY)

Head of Bureau of Communication, Public Information Services, and Cooperation

Agung Pribadi (08112213555)

Share This!