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Thursday, April 28, 2016

May 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 exact compute mechanism.**

This is the 10th 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 and YTD: RM 1.75.

April 2016
Although the DOHA talks failed in producing a deal to freeze some oil output, Russia and Saudi has agreed to put oil production levels at January's level which will boost price. In more recent developments, America's oil inventories are coming down. Oil hits 2016 high ahead of U.S. inventory report (see link)

MYR continues to receive support from foreign investors though the level of inflows has moderated in April. MYR struggled when 1MDB defaulted payment
IPIC fails to make bond payment, but 1MDB says default limited (see link) and traded sideways in anticipation of Zeti's replacement. However the appointment has concluded and Ibrahim will get the top job which will be positive for the Ringgit. Ringgit stronger on new Bank Negara Governor (see link).

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.

Aboi's May'16 Prediction Analysis

RM/L between Mar and Apr is quite similar: 1.41 vs 1.40. Average oil price increased slightly from $41 to $42.71 (4.2%) but this compensated by stronger MYR (4.08 -> 3.90) a gain of 4.4%. The verdict is clear, I will predict that fuel price to be maintained @ current price of RM1.70 for RON95. Also with the Sarawak state election incoming in May price will only stay or go down slightly (but I don't see a reason why they would reduce it since BN winning Sarawak is a shoo in anyway).

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. As for YTD: RM 1.75.

**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 exact compute mechanism.**

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