RI crudes benefit from high utility demand<\/p>\n
SINGAPORE (Reuters): Spot premiums for Indonesian crudes
\ntouched their highest level in July pushing up much needed oil
\nrevenues even as international prices sink amid cuts to Asian
\nrefinery runs, traders said yesterday.<\/p>\n
Traders said the heavier Indonesian crude were propped up by
\nstrong demand from utility companies as power demand rises in
\nnorth Asia as air-conditioners use are ramped up in summer.<\/p>\n
But outright prices of the main crudes such as Minas and
\nWiduri are still weighed down by the high supplies and are only
\nat a two-month high.<\/p>\n
Spot premiums, on the other hand, rose last week to a near
\neight-month high of around 60 cents per barrel over the official
\nIndonesian Crude Price (ICP), traders said.<\/p>\n
Minas, the main crude produced, traded at 20 cents premium in
\nJune to the ICP, while in May it was at a discount.<\/p>\n
"It will definitely benefit Indonesian oil revenues to an
\nextent, they're at least getting that extra 60 cents per barrel
\npremium for their crudes," said a trader with a major oil
\ncompany.<\/p>\n
On Thursday, in its revised budget for 1998\/99, Indonesia said
\noil revenue would rise to 49.71 trillion rupiah (US$4.57 billion)
\nfrom 34.58 trillion, mainly because of the fall in the value of
\nthe rupiah.<\/p>\n
The budget had an assumed price of oil of $13.00 per barrel,
\ncompared to current assessment of $12.60 for Minas which accounts
\nunder a third of Indonesian crude production.<\/p>\n
The rising spot premiums of Minas and other grades were in the
\nmidst of depressed oil product prices in Asia, which has forced
\nregional refiners to slash operating rates for July, and probably
\nAugust.<\/p>\n
The main push for the Indonesian crudes was an increased
\ndemand for direct burning fuel by north Asian utilities as they
\nreplenish stocks.<\/p>\n
North Asian utility companies use nuclear, hydroelectricity
\nand oil for power generation.<\/p>\n
The bulk of Indonesian crudes are heavy grades suitable for
\npower generation, and are popular with utility providers because
\nof their low sulphur content which means the oil can be burned
\ndirectly.<\/p>\n
Utilities in Japan operate nuclear power plants at stable
\nrates to meet base demand, and adjust production from power
\nplants that run on oil to cover peak demand in summer.<\/p>\n
"The hot weather recently forced them to run down their
\ninventories of crude oil, and now they have to come out to
\nreplenish their stocks," said a trader.<\/p>\n
"That caused the spike in the burning crude prices last week,"
\nhe added.<\/p>\n
Indonesia's emergence with a larger than predicted export
\nvolume of Minas at the end of last week put a slight dampener on
\nthe spot prices, pulling Minas premiums down to around 40 to 50
\ncents on Monday.<\/p>\n
Indonesia allocated around 32,000 barrels-per-day (bpd) of
\nMinas crude for August, higher than the 28,000 bpd allocated for
\nJuly.<\/p>\n
It cut the August export allocations of its other heavy grades
\nWiduri, Cinta and Duri month on month, but traders had already
\nexpected this, so it failed to boost prices further.<\/p>\n
But the current August premiums of the heavy Indonesian are
\nstill higher compared to the past few months, which should
\nmaintain Indonesia' oil revenues, traders said.<\/p>\n
"We have to watch the Japanese weather and how much the
\nutilities need to buy to rebuild stocks," said a trader "But I
\nthink it can still get very hot, and prices could see a further
\nboost."<\/p>",
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