Starting January 2010, the G20 countries plan to report monthly data on oil production, consumption, refining and stock levels.
This is to promote greater oil transparency and market stability, according to a recent statement issued by the G20.
Additionally, to improve regulatory oversight of energy markets, relevant regulators will collect data on large concentrations of trader positions on oil in commodities futures markets.
Thus various market regulators will be empowered to question and assess whether it would be appropriate, for example, for a particular trader to have an overstock position in oil, which could then lead to a speculative move.
What the G20 is attempting to do is combat market manipulation that could lead to excessive price volatility, much like the one we saw last year, when the global oil price spiked to US$147 per barrel in July 2008.
What will be the impact of this G20 move on Indonesia?
JP/Irma
On the stock market, if speculative moves on oil (i.e. leading to other commodities as well) can be curbed, this would dampen sentiment on Indonesia as around a third of the Jakarta Composite Index's (JCI) total market capitalization is comprised of commodity-related stock (see chart for details), which would benefit from greater volatility in commodity prices.
On the economic front, it was recently reported by The Jakarta Post that Indonesia may fail to meet this year's oil production target of 960,000 barrels per day (bpd) on average.
If global oil prices are better contained, Indonesia's oil and other commodity-related exports would fall going forward.
As of Sept. 4, the country's oil production stood at 949,270 bpd, according to upstream oil and gas regulator BPMigas.
Furthermore, BPMigas is currently evaluating the option of selling crude stocks, given that Indonesia's 2009 oil lifting target is unlikely to be reached.
Given the above-mentioned condition, it is imperative that Indonesia increase its underlying oil production and deal with the old and insufficient number of wells.
This can be done through additional investment to help slow down or stop the rate of production declines.
That said, it is of great importance for the industry to identify where the incremental capital expenditure should go and whether it should be allocated into the existing brownfield developments as opposed to greenfields, which might be too difficult and take too long to develop, not to mention also that infrastructure might be lacking.
Going into deeper horizons is certainly going to be more expensive, particularly given that oil quality could be different, flow rates lower and drilling costs much higher, making it very difficult for oil companies to do it economically.
On a more positive note, it is also worth noting that Indonesia's status as a net oil exporter back in June 2009 was indeed short-lived - just a month long.
By July, Indonesia was back as a net oil importer.
July's oil imports jumped to more than US$1.8 billion compared to oil exports of slightly less than $1.5 billion, translating to $366 million in net oil imports.
In this light, curbed global oil prices could mean a better trade balance for Indonesia.
The writer is the senior vice president and head of research at Bahana Securities.
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