Asia braces as oil price surges to nine-year high
Asia braces as oil price surges to nine-year high
SINGAPORE (Reuters): Asia is bracing for the impact of oil prices at nine-year highs amid fears they could go even higher.
Key global producers Saudi Arabia, Venezuela and Mexico said on Wednesday they had no intention of relaxing a production- cutting pact during the key demand period of the next four months.
The pact has cut output by almost five million barrels per day (bpd).
Analysts believe prices could trend higher even after international benchmark Brent soared on Wednesday to its highest level since the Gulf War.
The January contract traded at $25.09 per barrel, surpassing the peak of $25.06 seen during 1996 and the highest level since prices traded at more than $40 during the Gulf War.
Oil's price strength waned slightly in Thursday's Asian trade, but levels were still within sight of the peaks hit in overnight New York and London.
December New York Mercantile Exchange (NYMEX) crude futures, which soared in New York to end at $26.60 per barrel, were 25 cents lower at $26.35 at 0815 GMT.
The decline was seen more as a pause in the rally, rather than a reversal of the upward trend that has pushed U.S. crudes to $26.70, the highest level in almost three years.
Asia consumes around 19 million bpd of crude but needs to import around 12 million bpd, making it vulnerable to oil price rises.
That means a rise in crude prices is a negative for the economy, although producers like Indonesia, Malaysia, Vietnam and Australia stand to benefit.
Indian petroleum minister Ram Naik said on Wednesday he expected India's import bill for oil to balloon out to 540 billion rupees ($12.4 billion) in the year to the end of March, compared with an import bill of 240 billion the previous year.
India, which consumes about 1.8 million barrels per day (bpd) of crude, most of which is imported, was also considering raising the domestic diesel price again, the minister said. A decision would be made by the end of November.
Japan, which represents a quarter of Asia's oil consumption, said on Thursday the surge in crude oil prices would have an adverse impact on the nation's industry.
"We are basically concerned over the situation. If crude oil prices continue their giddy climb, that would not be desirable," an official of the Ministry of International Trade and Industry (MITI) said.
In Thailand, which imports around 700,000 bpd of crude, national oil company Petroleum Authority of Thailand raised diesel prices just under two percent.
"The price hike came from pressure from rising prices in the world market," said Prasert Boonsamphan, PTT marketing director.
"If average crude oil prices stay in the current range of $23- $25 a barrel, domestic retail prices would not come down and there are chances of them going up," he said.
Another country that would be under pressure to raise domestic prices would be the Philippines. The country has a deregulated market but prices rises in the past have prompted public demonstrations and strikes among transport workers.