Storms Raised August ICP to USD41.63 per Barrel

MINISTRY OF ENERGY AND MINERAL RESOURCES

REPUBLIC OF INDONESIA

PRESS RELEASE

NUMBER: 271.Pers/04/SJI/2020

Date: 5 September 2020

Storms Raised August ICP to USD41.63 per Barrel

Concerns over tropical storms Marco and Laura that passed through the heart of the oil industry in the United States contributed to an increase in Indonesian Crude Price (ICP) in August 2020. Ministry of Energy and Mineral Resources (EMR), in this case Directorate General of Oil and Gas, set the August ICP at USD41.63 per barrel or picking up by USD0.99 per barrel from the previous month.

"The August ICP is very much affected by the US policy in dealing with Tropical Storm Laura around Gulf of Mexico. Besides cutting oil production, they even stopped offshore drilling operations although the storms did not cause widespread damage," said Head of Bureau of Communication, Public Information Services, and Cooperation of Ministry of EMR in Jakarta on Saturday (5/9).

The ICP prices are set out in Ministerial Decision Number 158 K/12/MEM/2020 on Determination of Indonesian Crude Price for August 2020 dated 3 September 2020.

Besides the natural disasters that hit Gulf of Mexico areas, continued Agung, the market prospects for crude demands are still highly affected by the corona virus pandemic. "The Covid-19 is still an important variable in improving the ICP," he explained.

According to Ministry of EMR's records, the ICP average throughout 2020 until the current month is USD40.08 per barrel. The January ICP was USD65.38 per barrel, then it fell because of the pandemic, namely to USD56.51 per barrel (February), USD34.23 per barrel (March), and USD20.66 per barrel (April).

However, in line with the recovery of economic activities and hopes for the discovery of Covid-19 vaccine, the ICP has slowly boosted to USD25.67 per barrel in May, USD36.68 per barrel (June), USD40.64 per barrel (July), and USD41.63 per barrel (August).

According to Agung, the other factors affecting the ICP movements are the level of OPEC+ compliance to the production cut agreement which reaches 95% and plans to cut production by several OPEC+ countries in August and September 2020 to compensate for production excess in May-July 2020.

OPEC's August 2020 report shows a positive economic trend with the recovery of the services sector, marked with revenue growth that exceeded forecast, which supports the equity market in general. Additionally, the number of rigs operating in the United States has lowered to 176 units in early August 2020 (683 rigs in March 2020 and 185 rigs in July 2020). Globally, refinery margin had started to recover in July 2020 due to rising transportation activities because some countries has eased lockdown.

Meanwhile, the Energy Information Administration (EIA) released a report on the United States' declining stock of crude oil by 10.8 million barrels to 507.8 million barrels and gasoline products by 8.6 million barrels to 239.2 million barrels.

Additionally, a higher level of activity by US manufacturers and a fall in gasoline demand in a week from 9.16 million barrels per day (bpd) to 8.78 million bpd had contributed to the ICP pricing. (IY)

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

Agung Pribadi (08112213555)

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