The Indonesian Crude Price (ICP) continues its upward trend. The ICP Team recorded that, using the formula for calculating the ICP, the average price of Indonesian crude in May 2016 was US$ 44.68 per barrel, up US$ 7.48 or 20 percent on the previous month’s figure.
In fact, the price of SLC or Minas type oil in May 2016 also rallied by US$ 12.21 per barrel to US$ 49.46 per barrel, reflecting the rise in the price of several major crude oils on the international market. (Read: High Demand, Indonesian Crude Price in April US$ 3 per barrel)
In May, the average price of crude oil on the international market was up on the previous month’s figure. The price of West Texas Intermediate (WTI) oil on the NYMEX was up US$ 5.67 per barrel to US$ 46.80 per barrel. Meanwhile, the price of Brent oil on the ICE rose US$ 4.31 per barrel to US$ 47.65 per barrel. The price of OPEC oil rose US$ 5.26 to US$ 43.12 per barrel.
Several factors led to this rise in world oil. First, Goldman Sachs’ forecast of an oversupply over the last few months turned into a deficit. Goldman Sachs revised the magnitude of the increase in world oil demand this year by 0.2 million barrels per day to 1.4 million barrels per day. The forecast anticipates an increase in demand from China.
Second, the decline in oil production in non-OPEC countries. The May 2016 edition of the International Energy Agency (IEA) publication announced that the oil production of non-OPEC countries in April 2016 fell by 0.125 million barrels per day to 56.6 million barrels per day.
Meanwhile, the EIA weekly update, the level of US crude oil production per 20 May was down 58,000 barrels per day in the previous month, to 8.77 million barrels per day. This was the lowest level since September 2014. (Read: Planned Production Increase of Cepu Block Hindered by Environmental Permit)
Third, the decline in oil inventories in developed countries or the Organisation for Economic Cooperation and Development (OECD). The May 2016 OPEC Monthly Oil Market Report (MOMR) revealed that the commercial oil stocks of the OECD countries had decreased 11.5 million barrels in March 2016, to 3,049 million barrels.
Meanwhile, according to the EIA report, US commercial crude oil stocks as of the end of May fell successively by 6.3 million barrels and 6.1 million barrels to 537.1 million barrels and 150.9 million barrels.
Fourth, disruption to the production of more than 1.5 million barrels per day in Canada, Nigeria, and Ghana in early May. However, according to the EIA weekly update, demand for rose 14,000 barrels per day to 9.52 million barrels per day and US fuel stocks declined 1.7 million barrels to 240.1 million barrels.
Fifth, the number of rigs in the world, except China, fell by 71 to 1,057 rigs in April 2016. According to a report by Baker Hughes, oil rig use in the US per 27 May was down 16 rigs on the previous month, to 316 rigs,
Turning to the Asia Pacific region, contributing to the increase in crude oil prices was a 5.6 percent decline in China's oil production to 4.04 million barrels per day. This was the lowest production since July 2013.
Local government policy, meanwhile, triggered a rise in demand for Chinese oil. In addition, the International Monetary Fund (IMF) revised China's economic growth projection upwards. (Read: Chinese Investment: No Longer False Hope)
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