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Jakarta Post

Hopes of US-China detente pushes Indonesian crude prices higher

  • Norman Harsono
    Norman Harsono

    The Jakarta Post

Jakarta   /   Thu, December 5, 2019   /   02:21 pm
Hopes of US-China detente pushes Indonesian crude prices higher The United States and China are two of the world’s most powerful economies. The dynamics in their relations can significantly affect the global economy. (Shutterstock/File)

Indonesian crude oil prices reached US$63.26 per barrel in November, the highest figure since May, mainly driven by market optimism for a cool down in the United States-China trade frictions.

Crude oil price movements will affect the government's oil and gas revenue as well as the energy subsidy it needs to spend during the fiscal year.

November saw an increase in crude oil prices of 5.7 percent month-to-month, which aligned with the rising prices of international benchmark Brent and West Texas Intermediate (WTI), which respectively rose 5.5 percent and 5.7 percent over the same period.

Bloomberg reported on Wednesday that the US expected to complete “phase-one” of a trade deal with China before US tariffs on Chinese products were set to rise on Dec. 15. The deal is slated to happen despite US President Donald Trump’s comment about closing a trade deal after next year’s US presidential election.

The trade spat between the world's two-largest economies has weakened international trade and eventually slowed global economic growth.

The International Monetary fund (IMF) said in its October World Economic Outlook that it expected global growth to stand at 3 percent this year, the lowest level since 2009 and down 0.3 percentage points from the April 2019 World Economic Outlook. While global growth is projected to pick up to 3.4 percent in 2020, that would still be 0.2 percentage points less than predicted in the April assessment.

“Rising trade and geopolitical tensions have increased uncertainty about the future of the global trading system and international cooperation, taking a toll on business confidence, investment decisions and global trade,” the IMF report says.

In addition to cooling tensions between the US and China, several developments with regard to geopolitical issues also have provided optimism.

“The European Union’s decision to delay Brexit until the end of the English Parliament’s elections in early January 2020 also prevented the development of substantial short-term economic risks,” the Energy and Mineral Resources Ministry said in a statement.

According to the country's state budget, the government has set crude oil price assumptions at $70 per barrel this year and $65 per barrel next year.