The retail of price for petrol and diesel in Malaysia ought to come down in the near future. This is because at the moment, the price of crude oil in the international market is much lower than what it was at the end of May, when Government abruptly announced the retail price of petrol and diesel drastically increased to RM 0.72 and RM 1.00 respectively.
On the 5 June 2008, the RM 1.92 per litre of petrol was increased to RM 2.70. Crude oil price was trading at almost USD 140 per barrel. Today, the price of crude oil went down to just below USD 113 per barrel. It is expected that it will go down to USD 105 per barrel by end of the year.
This is because the real demand of crude oil has significantly dropped these past two months. As oil is a very elastic raw material, the shift in demand strongly affect the price of the traded commodity.
The speculators, especially rogue traders decided to abandon their position and went into near panic selling of late. Especially financial firms like Goldmann Sachs and Morgan Stanley. They are now heavily exposed and no longer able to hold their position, especially considering their financial backing for their earlier mopping exercises. Other traders might go for the short selling when this happens.
The fundamental demand for oil, especially for diesel has fallen. For one, the much anticipated Beijing Olympics has already kicked off. Two, the supply of oil production has been increased with the Americans’ announcement of their increased in production, these past two months. This actually triggered the gradual selling, which is relatively steep. The drop has been quite significant.
The retail price of petrol has shed USD 25-30 per barrel.
The forward market is also coming down as well. If the price is weak, on the front end it seemed that it is going up. In actual, it is not. The market premium should be observed. It has actually gone negative. It is now at USD 2.00 lower than the actual posted price, which actually pushing the retail price down. That is indicative that the price is going down.
This is actually a physical trade. Bottomline, the fundamentals of supply and demand still rules. The demand has ‘collapse’. As such, the physical trade is significantly reduced.
Most of the speculators are not ditching wholesale market yet. However, it is moving towards the trigger level where a supportive level is expected to be breached soon. Then the wholesale ‘collapse’ could be expected.
The fair price to speculate for retail petrol at the moment is RM 2.35 and could go as low to RM 2.10 within this year. The actual effect on the economy as a whole maybe be inelastic. However, any significant reduction will definitely give the much needed positive economical psychology to the rakyat.
Thus DPM Dato’ Seri Mohd. Najib Tun Razak might be right after all.
*Updated 310pm
Also consider reading a former trader’s hunch on the downtrend movement of the black gold.
Petrol price may come down to RM 2.10/litre
The retail of price for petrol and diesel in Malaysia ought to come down in the near future. This is because at the moment, the price of crude oil in the international market is much lower than what it was at the end of May, when Government abruptly announced the retail price of petrol and diesel drastically increased to RM 0.72 and RM 1.00 respectively.
On the 5 June 2008, the RM 1.92 per litre of petrol was increased to RM 2.70. Crude oil price was trading at almost USD 140 per barrel. Today, the price of crude oil went down to just below USD 113 per barrel. It is expected that it will go down to USD 105 per barrel by end of the year.
This is because the real demand of crude oil has significantly dropped these past two months. As oil is a very elastic raw material, the shift in demand strongly affect the price of the traded commodity.
The speculators, especially rogue traders decided to abandon their position and went into near panic selling of late. Especially financial firms like Goldmann Sachs and Morgan Stanley. They are now heavily exposed and no longer able to hold their position, especially considering their financial backing for their earlier mopping exercises. Other traders might go for the short selling when this happens.
The fundamental demand for oil, especially for diesel has fallen. For one, the much anticipated Beijing Olympics has already kicked off. Two, the supply of oil production has been increased with the Americans’ announcement of their increased in production, these past two months. This actually triggered the gradual selling, which is relatively steep. The drop has been quite significant.
The retail price of petrol has shed USD 25-30 per barrel.
The forward market is also coming down as well. If the price is weak, on the front end it seemed that it is going up. In actual, it is not. The market premium should be observed. It has actually gone negative. It is now at USD 2.00 lower than the actual posted price, which actually pushing the retail price down. That is indicative that the price is going down.
This is actually a physical trade. Bottomline, the fundamentals of supply and demand still rules. The demand has ‘collapse’. As such, the physical trade is significantly reduced.
Most of the speculators are not ditching wholesale market yet. However, it is moving towards the trigger level where a supportive level is expected to be breached soon. Then the wholesale ‘collapse’ could be expected.
The fair price to speculate for retail petrol at the moment is RM 2.35 and could go as low to RM 2.10 within this year. The actual effect on the economy as a whole maybe be inelastic. However, any significant reduction will definitely give the much needed positive economical psychology to the rakyat.
Thus DPM Dato’ Seri Mohd. Najib Tun Razak might be right after all.
*Updated 310pm
Also consider reading a former trader’s hunch on the downtrend movement of the black gold.
- Economic analysis and commentary
on August 20, 2008 at 00:15 Comments (19)