RI braces for high oil prices all year

Leony Aurora, The Jakarta Post, Jakarta

The government expects crude oil prices to remain high throughout 2005 due to lower-than-expected production from non-members of the Organization of Petroleum Exporting Countries (OPEC) and rising demand from China and the United States.

Indonesian governor for OPEC Maizar Rahman said on Monday that London-based North Sea Brent Crude oil prices should stay between US$47 and $55 per barrel, citing a study of the Center of Global Energy Studies (CGES).

The Indonesia Crude Price (ICP) usually averages between $2 and $3 below the Brent oil prices.

"Additional production from non-OPEC members may stand at 600,000 barrels per day (bpd) this year, lower that the initial expectation of 990,000 bpd," said Maizar.

Meanwhile, on average, world oil demand is estimated to rise by 1.89 million bpd this year to 84.02 million bpd as faster- paced economies push for more industrial output and consumption.

China, whose economy is expected to grow by 8.4 percent this year, will require an additional 960,000 bpd this year and North America another 610,000 barrels.

OPEC crude production in the first quarter of the year stood at 29.51 million bpd while non-OPEC supply in the period was 54.56 million bpd.

Maizar urged the government to be more realistic with the current soaring oil prices. "The high prices will stay throughout the year," he said.

The cash-strapped government, in its budget this year, has assumed an annual average of $35 per barrel, but it has not yet been deliberated upon or approved by the House of Representatives.

In its initial budget, the oil price was assumed to average $24 per barrel.

Other factors keeping oil prices high have been unseasonably cold weather in the northern hemisphere and a lack of investment, despite several deregulation efforts conducted by OPEC and non- OPEC countries.

Increasing stockpiles, especially in the U.S., and higher capacity of OPEC might drive prices slightly down.

OPEC recently increased its quota by 500,000 bpd to 28 million bpd to ease oil prices.

With Iraq producing effectively again -- the country's output has not been calculated into OPEC's quota since the first Gulf War -- of 2 million bpd, OPEC's output should exceed 30 million bpd.

However, according to a report cited by Maizar, OPEC produced just 30.4 million bpd in April. Still, "it (higher production) did not bring prices down. Prices are out of OPEC's hands," said Maizar.

Indonesia produced some 1.082 million barrels of crude oil and condensate a day in April. The country's oil output, however, has declined steadily due to aging oil fields and a lack of investment.

Indonesia imports some 400,000 barrels of fuel per day to meet domestic demand.