Big stocks make oil prices stagnate

Big stocks make oil prices stagnate

JAKARTA (JP): Director General for Oil and Natural Gas Suyitno Patmosukismo said yesterday large stocks held by major consumer countries were weakening the oil market despite the coming of winter.

Patmosukismo told newsmen that international oil prices have stagnated at a range of US$16-$17 per barrel over the last few weeks.

"This is unusual in that the prices even declined slightly from $17 in November to $16.29 last month in view of the onset of the winter season which was supposed to spur demand," he noted.

Patmosukismo, who is also the chairman of OPEC's Council of Governors, blamed the persistently weak oil market on stock releases by the major consuming countries.

"The major consumers, instead of increasing purchases, have been drawing down on their stocks, thereby depressing the market," he added.

He also blamed the less severe than expected winter weather as another reason behind the weak oil market.

International analysts have predicted that the world oil demand will increase by one million barrels a day during the winter season.

Nonetheless, Patmosukismo did not expect the oil market to remain weak for a long time because the major consumers will have to rebuild their strategic stocks to a level equivalent to at least two months' utilization.

"I therefore expect the oil market to recover within the near future," he predicted.

The president of the state-owned Pertamina oil company, Faisal Abda'oe, shared the view that the international oil market will soon pick up again.

Abda'oe saw the releases by the major consumers simply as a temporary measure to bring down their stocks to a normal level.

"But anyway, the current level of oil prices will not affect the government's target of oil tax receipts, which are based on an average price of $16 per barrel.

"The average export prices of our crude oil even exceeded $16 during the April-December, 1994 period," Abda'oe pointed out. (vin)