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Wednesday, August 31, 2016

September 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 12th 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 3.25.

August 2016
Oil to continue to trade sideways as it faces the heat on several fronts. China's slowing crude demand & speculation of Yuan devaluation due to the soft economic growth. Absence of production cuts from OPEC as they intent to keep market share. The resilience of North American shale suppliers to keep pumping despite crashing prices. Continuing concerns over the effects of Brexit on crude demand. Moreover, a stronger dollar has made the greenback-priced crude more expensive for investors holding foreign currency.

Nothing much on the MYR front. There are speculation that Bank Negara would still lower the OPR by another 25 basis points. Already our growth is tapering, from the initial 5.5% down all the way to 4%. Brexit's impact will only be seen in late Q3 and Q4 for 2016, the heighten anxiety over it coupled with uncertainty makes it very difficult even for experts to gauge the real impact. Malaysia's export market to the UK is only 3% of our total so I would think not much would be felt domestically.

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 Sept'16 Prediction Analysis

RM/L between July and August is roughly the same: 1.61 vs 1.62. Average oil price almost remained relatively the same $47.71 to $48.06 and MYR was flattish (4.02). Aboi's is confused as to why the price was unchanged last month as there are no major political happenings or festivities besides the incoming Merdeka Day. Nevertheless I will continue to stick to my guns, I will predict that fuel price to be increased by up to 15 sen to RM1.90 for RON95. Please fill your tank as soon as possible. Worse come I will continue to be confused if the price is unchanged again.

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 3.25.

**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.**