Lack of Supply Causes Indonesian Crude Price Up US$ 5.27 in March

The Indonesian crude price (ICP) continued its upward trend last month after it crept up in February 2016, by US$ 1.4 per barrel. In March, the ICP was up by US$ 5.27 per barrel on the previous month.

The ICP Team recorded that the ICP in March 2016 reached US$ 34.19 per barrel, up significantly from the average price of the previous month of US$ 28.92 per barrel. The ICP has risen to keep pace with the increase in major crude oil prices on the international market. WTI (West Texas Intermediate) oil prices last month increased by US$ 7.37 per barrel to US$ 37.99 per barrel. Brent crude oil prices also rose US$ 6.26 per barrel to US$ 39.79 per barrel. (Read: Indonesian Crude Price Climbs Again in February 2016)

There are a number of factors behind the significant increase in global oil prices last month. First, the decline in crude oil production in February. A publication issued by the Organization of Petroleum Exporting Countries (OPEC) last month said that the global crude supply was down by 0.21 million barrels per day to 95.73 million barrels per day last month.

A report by the International Energy Agency (IEA) also indicated the same. In March 2016, there was a decline in crude supply from OPEC countries by 90 thousand barrels per day to 32.61 million barrels per day. “It’s because Iraq, Nigeria and United Arab Emirates have reduced their production while Saudi Arabia maintained its production,” said the ICP Team in an official release, Tuesday (5/4).

The decline in production was also reflected in the decreased rig use. A report published by Baker Hughes in March 2016 said world rig use in February 2016 decreased by 200 units to 1,695 rigs compared to the previous month. (Read: Indonesian Crude Price in January 2016 Tumbles Amid Overwhelming Supply)

Exchange rates also had implications for oil prices. Based on ICE US Dollar Index (DXY), the exchange rate of the US dollar against six major global currencies slid 3.80 points from 98.37 to 94.57, compared to February 2016.

Qatar’s Oil Minister Muhammad Saleh as-Sada said that global oil producers will halt their oil production. Oil producing countries, both OPEC members and non-OPEC, will meet in Doha on 17 April to discuss reducing global oil production. Fifteen OPEC members and non-OPEC that account for 73 percent of global crude supply have expressed support for the meeting in Doha, Qatar. (Read: Indonesia to Take Neutral Stance at Next OPEC Forum on Production Cut)

The decline in oil price was also attributed to increased global oil consumption. According to a report issued by the US EIA (Energy Information Administration) in the third week of March 2016, US oil product stocks have decreased due to increased consumption, with gasoline stocks declining by 9.9 million barrels and distillates stocks by 1.3 million barrels compared to February 2016.

In the Asia Pacific region, a factor contributing to the rise in crude oil prices was the 2.1 percent increase in China’s crude imports from Kuwait to 250 thousand barrels per day. The utilisation of Japanese refineries also increased by 1 percent to 543,509 kilolitres per day.