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Thursday, January 28, 2016

February Prediction of Pump Oil Price (Ron 95)

**It is easier to predict the direction of fuel price than to estimate amount of swing of fuel price due to the government REFUSING to disclose the compute mechanism.**

This is the 8th time I'm posting my prediction in a blog posting. Please bare that I will repeat some lines for new readers :) Also I always care to post my predictions before any official news or other analysts have given their views (typically too late after the queue starts at the stations).

Why is this sort of important? Say every month you know ahead of official price announcement and let's assume there is a price swing on average of 10 sen per month and you can fill in 35 litres. 0.10 x 35 x 12 = RM 42 savings a year. Obviously you don't feel it's a lot but every year you will always call and beg for credit card waiver of RM50 on govt service charge? Ironic isn't it? :) My total savings for 2015 is: RM 50.75.

Feb 2016
Crude oil price resumes its free fall towards the high $20s but managed a small rebound to the range of $30. US continues to add more to its stockpiles and crude inventories continue rise. Also Iran has completed the nuclear deal and is poised to add as much as 500,000 barrels a day, which in a market that is already oversupplied by over 1 million barrels per day. Learn About The Oil Crisis (link)

MYR's performance was a bit eventful; it weakened after the US fed hike but towards the last week of the month it went down to the level it started of in the month of Dec. I suspect that our central bank (BNM) may have sold some reserves off to fend the Ringgit but I can only confirm this when they release the data on the 29th of Jan. Again I think this is about where MYR will stand so it's time to change foreign currencies back to MYR, hold cash and wait for "jualan harga murah". Will 2016 Bring a Bear Market? (link)

We also have the so called budget re-calibration on 28th of Jan; this is because our original budget is based on the assumption that the oil price holds steady ~$48. Clearly this is not the case, the new normal should be $32. It remains to be seen what will be cut from the Budget. There are also rumours that RON 95 will be GST-ed and that a floor price for RON 95 will be introduced because our coffers are running dry.

Some asked why did the price of crude oil drop in 2015?
- Strong US dollar; all commodities are priced in dollar and that includes oil.
- Organization of Petroleum Exporting Countries (OPEC); refuses to cut production in order to maintain market share.
- Oversupply of crude oil; thanks largely to US shale oil producers which is now the world's biggest swing producers.
- Declining demand; world's no.2 economy China is slowing.
- Iran nuclear deal; removes Western sanctions and thus allowing country to export oil once again.
- Successful Paris climate change breakthrough talks; marks the beginning of the end of the fossil fuel age.

How come our pump fuel price did not drastically drop in 2015? 
- This is primarily due to weakening MYR to the USD.

RM/L has dropped a lot again from 1.77 (Nov) -> 1.50 (Dec) -> 1.25 (Jan). With such a drastic drop there is no doubt that I will predict that fuel price will drop by 15 sen +/- 5sen. There is no need to rush to the petrol station, please wait until after the announcement on 31st and fill your tank on 1st February (Monday).

Below is a table of my previous predictions way back to the beginning of 2015. My predictions are based on Tapis crude oil price, performance of Ringgit (added after Mar) & domestic politics (which was added after May). My total savings to date: RM 50.75 (I will reset the amount for 2016 starting next month)

**It is easier to predict the direction of fuel price than to estimate amount of swing of fuel price due to the government REFUSING to disclose the compute mechanism.**

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