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Monday, October 31, 2016

November 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.**

Sorry I was out on holidays and therefore I missed out the October postingThis is the 13th 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 6.75.

October 2016
Oil spikes as a weekend marathon of talks between major oil producers failed to finalize plans to implement an output cut, threatening the viability of an agreement reached last month to reduce production between by as much as 2%. Again an absence of production cuts from OPEC as they intent to keep market share at a cost to their budget deficits. Prospects for oil to go higher than it is right now appears dim.

MYR is likely fall a little more due to OPEC's internal disagreement over a planned output cut. The speculation that Bank Negara would still lower the OPR by another 25 basis points is still alive and could be as early as 23rd November 2016 as the country's growth remain tepid. Budget 2017 is a letdown in my opinion; RM214.6 for management and only RM46 for development. It is an 'election' budget in which its perks and benefits are largely targeting the ruling party's voter base. Hence investors don't see a big reason why they should pour money into Malaysia - MYR to remain weak for another year. 

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 Nov'16 Prediction Analysis

RM/L between Aug and October weaken: 1.62 vs 1.87. Average oil price bumped up from $48.06 to $53.51 and MYR remain continues to remain weak (4.02 to 4.17). Not very good news after the so called 'election' budget. I will predict that fuel price to be increased by up to 15 sen to RM1.95 for RON95. Please fill your tank as soon as possible today before the announcement.

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 6.75.

**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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