OPEC cuts could give Indonesia quick reward<\/p>\n
SINGAPORE (Reuters): Crisis stricken Indonesia could reap
\nimmediate rewards from its decision to join in with OPEC's plan
\nto cut output and shore up flagging prices, experts said
\nyesterday.<\/p>\n
They said Indonesia was certain to gain in the longer term too
\nfrom the Organization of Petroleum Exporting Countries' agreement
\nin Vienna to cut supply by 1.355 million barrel per day (bpd).<\/p>\n
\"The government had no alternative but to follow OPEC and hope
\nthat this (cut) will raise revenue. In the mid-to-long term it is
\na good decision,\" Jakarta-based economist Arif Arryman of the
\nprivate think-tank Econit said.<\/p>\n
Indonesia, Asia's only OPEC member, is contributing 30,000-bpd
\nto the latest cuts, compared to the 70,000-bpd it gave up in
\nMarch when OPEC initiated the first round of cutbacks totaling
\n1.245 million bpd.<\/p>\n
Indonesian Mines and Energy Minister Kuntoro Mangkusubroto
\nsaid in Vienna after the deal was announced \"we will cut for the
\ngood of the market and the good of the (OPEC) organization.\"<\/p>\n
The two rounds of cuts means that from July 1 OPEC plans to
\ncut 2.6 million bpd, including 100,000 bpd from Indonesia.<\/p>\n
For Indonesia, the government is giving up a relatively small
\namount of production this time around compared to the March cuts,
\nbut is gaining more in dollar earnings, analysts said.<\/p>\n
Prices have fallen slightly since OPEC announced its second
\nround of production cuts on skepticism the group will actually
\ndeliver such large cuts.<\/p>\n
But prices have risen about $1.50 per barrel in the past 10-
\ndays in the run up to the Vienna meeting this week, good news for
\nIndonesia which has seen an 85 percent slump in the value of its
\ncurrency versus the dollar in the past year.<\/p>\n
International benchmark Brent crude fell 31 cents to $13.61
\nper barrel in London overnight after OPEC announced the latest
\ncuts, but prices had already risen from a cyclical low of $12.15
\ntouched on June 15.<\/p>\n
Oil traders said the production cuts were greater than had
\nbeen expected by the market, so they doubted prices would resume
\ntheir down trend.<\/p>\n
But analysts said Indonesia faces a dilemma in cutting its
\n1.38 million bpd production because of its dire need for foreign
\nexchange earnings.<\/p>\n
\"The country is operating under such intense financial
\npressure, it must be difficult to forgo any oil sales right now
\nwhich bring in hard currencies,\" John Russell, managing director
\nof Bangkok-based Petroleum Economics Ltd.<\/p>\n
But the government has acknowledged the tough oil market and
\nearlier on yesterday economic czar Ginandjar Kartasasmita
\nannounced a downward revision of the government's assumed price
\nfor oil to $13 per barrel from $14.50.<\/p>\n
\"This is because the price of oil is considerably lower in the
\nmarket,\" he said.<\/p>\n
\"The revenue in terms of U.S. dollars will decline for sure
\nbut if we use current exchange rates there is quite a significant
\nincrease,\" he said, referring to revenues in rupiah terms.<\/p>\n
Arryman said the budget assumed an exchange rate of 6,000
\nrupiah to one dollar, but the current market value was 14,750.<\/p>\n
But the increase in rupiah revenues from crude sales will not
\nbe enough to tide the country over the bad times as a lot of its
\nexpenditures, including debt servicing and capital goods imports,
\nare in U.S. dollars.<\/p>\n
OPEC producers battling low oil prices announced deeper than
\nexpected output cuts of almost five percent on Wednesday to drain
\na disastrous glut of crude.<\/p>\n
The producer club agreed to choke petroleum flows by 1.355
\nmillion barrels per day (bpd), an OPEC communique said, more than
\ndoubling an earlier set of reductions agreed in March.<\/p>\n
The following are substantial excerpts from the official OPEC
\ncommunique issued after a meeting on Wednesday in Vienna to agree
\noil output cuts.<\/p>",
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