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Saturday, September 12, 2015

Saturday Lite: Malaysians 2Pay More 4Fuel in October?

We are one third into September (10 days) and the current trend points to an increase of 15 sen of pump fuel price in October

Oil continues to trade sideways, swinging in the $40 - $50 range for the last six weeks. The supply glut is expected to persist as the OPEC chief says that the cartel 'not ready' to cut production. Malaysia is too small and is not part of OPEC, so 'kita tonton saja'; at the mercy of others.

Yesterday BNM decided again to maintain the Overnight Policy Rate (OPR) at 3.25% (see link). The next MPC meeting is 5th November 2015 so the Ringgit's rout should continue for awhile (4.5 to the dollar any takers?). The next MPC meeting (always every two months) is scheduled on 5th November 2015 and will be the last for 2015. Zeti's (our BNM Chair) 5-year term will end next year, there is no mention that she will run again so my guess is she's not going to care about it - since PM Najib is adamant to get rid of her anyway.

In other developments FOMC (US Fed) will hold their meeting next Thursday and decide if US interest rate should rise (0.25% -> 0.50%). As of now the chance of this happening is ~30% (based on consensus), again the longer this drags the worse it is for the Ringgit, we are bogged down by a confidence crisis as long as the Super Moron heads the office.

Back to topic; as you know I use three factors when estimating pump fuel price in Malaysia. [1] Global oil per barrel price [2] USD vs MYR [3] Political events. Recently someone sent me an interesting diagram that depicts how fuel price is calculated (using factor #1 and #2) in Malaysia, it was accurate for last month's (September). Obviously it is hard to overlook it so by my nature I will leverage the methodology. The two input variables are Tapis crude oil price & USD/MYR exchange rate.

RM2.10/L (+15 sen) based on 10-day avg on September

If oil trades within the same range for the rest of the month while MYR continues to depreciate we are definitely going to see higher pump fuel price in October. Semua salah siapa? Cannot say hehe...

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