The closing of the SVB reduced the March ICP price to 74.59 US Dollars per Barrel

Illustration (Photo: Doc. Antara)

JAKARTA - The government through the Minister of Energy and Mineral Resources (ESDM) Arifin Tasrif has set the average Indonesian Crude Price (ICP) in March 2023 at US$74.59, down US$4.89 per barrel from US$79.48 US dollars per barrel.

"The determination of the March 2023 ICP of USD 74.59 per barrel is stated in the Decree of the Minister of Energy and Mineral Resources Number 131.K/MG.03/DJM/2023 concerning March 2023 Indonesian Crude Oil Prices April 3, 2023", said the Head of the Communications Bureau, Public Information Services and Cooperation (KLIK) Ministry of Energy and Mineral Resources Agung Pribadi quoted on Wednesday, April 5.

Based on the analysis of the Indonesian Crude Oil Price Team, continued Agung, several factors contributed to the decline in the price of the main crude oil on the international market, namely market concerns over global economic conditions, especially in Europe and the US, caused by the closure of Silicon Valley Bank on March 10, 2023.

The closure of the SVB, which was the largest banking system failure in the US, was caused by, among other things, massive withdrawals by customers, increased uncertainty regarding future inflation, interest rates and economic activity which had a major impact on oil consumption and global investment.

"Market players are concerned about higher-than-expected inflation, raising fears of rising interest rates, strengthening the dollar exchange rate and slowing economic activity, and leading to reduced demand for crude oil", Agung explained.

The International Energy Agency (IEA) in its March 2023 report stated another influencing factor, namely the throughput (processing level) of global refineries which reached its lowest point in February 2023 at 81.1 million barrels per day due to seasonal maintenance in the US and several other countries. .

Furthermore, another influencing factor is the existence of a policy from the US Department of Energy which states that the time needed to refill US strategic oil reserves (SPR) can take several years.

"This has also raised market concerns about the potential for oversupply, especially regarding the US plan to re-release 26 million barrels of oil from SPR", Agung continued.

In addition, the IEA also said that world crude oil supplies jumped by 830,000 bopd in February 2023 to 101.5 million barrels per day, partly due to increased production in the US and Canada.

And it is estimated that non-OPEC countries' crude oil supply growth will reach 1.6 million barrels per day in 2023.

For the Asia Pacific region, apart from being caused by these factors, the decline in crude oil prices was also influenced by market concerns over the recovery in China's oil demand as the Chinese Government set a moderate GDP target, lower than economists' forecasts.

"The reduction in consumption of gasoline products by up to 7.51 percent and gas oil products by up to 0.34 percent in China resulted in a decrease in the selling price of petroleum products in China", Agung concluded.