Impact Of European Crude Oil Embargo, Government Sets ICP At 109.61 US Dollars

The Equinor oil field in Johan Sverdrup, Norway's North Sea. (Photo: Special)

JAKARTA - The government has set the average ICP of Indonesian crude oil in May 2022 based on the calculation of the Formula Indonesian Crude Price (ICP) at 109.61 US dollars per barrel.

This amount rose 7.10 US dollars per barrel from the previous 102.51 US dollars per barrel in April 2022.

"The average price of Indonesian Crude Oil for May 2022 is set at 109.61 US dollars per barrel," reads the fourth dictum of the Decree of the Minister of Energy and Mineral Resources Number 54.K/MG.03/DJM/2022 concerning Indonesian Crude Oil Prices for May 2022, quoted on Friday, June 3rd.

Based on the Executive Summary of the Indonesian Crude Oil Price Team, the increase in the price of major crude oil in the international market was influenced by several factors.

The first is the European Union agreement on the 6th package of sanctions against Russia, namely the crude oil embargo.

This raises market concerns that will result in further disruption of global crude oil supply at a time of limited supply amid increasing demand for fuel and jet fuel ahead of the peak of the summer driving season in the US and Europe.

Second, the increase in international oil prices was also influenced by world crude oil demand.

"In addition, the limited supply of global crude oil is due to OPEC+ production being 1.5 million bopd lower than the production quota," quoted from the exsum.

Based on the OPEC Report in May 2022, there is an increase in the projected growth of world crude oil demand in 2022 by 3.4 million bopd, resulting from improving global economic activity, mobility, and industry.

Meanwhile, demand for OPEC crude oil was revised to increase by 100 thousand bopd, to 29 million bopd, 800,000 bopd higher compared to 2021.

The IEA in its May 2022 report said that world oil demand for 2022 is expected to increase by an average of 1.8 million bopd to 99.4 million bopd.

It was noted that refineries in the US increased production by 93.2 percent, the highest since December 2019, to meet high demand as exports of refined oil products increased.

Another factor is in the weekly stockpiles report of the EIA (US Energy Information Administration) for May 2022, there was a decline in gasoline stocks by 8.9 million barrels to 219.7 million barrels, or the lowest since December 2021, when compared to April 2022.

Oil prices were also affected by geopolitical tensions in the Middle East as Iran seized two Greek tankers in retaliation for the US seizure of Iranian crude in Greek waters, raising fears of disruption to crude supplies via the Strait of Hormuz through which a third of the world's crude oil passes.

Lastly, the decline in the US Dollar exchange rate, as fears of a global recession eased and investors lowered expectations of aggressive US interest rate hikes.

Meanwhile, for the Asia Pacific region, the increase in crude oil prices was also influenced by the plan to gradually reopen China's commercial center, Shanghai, after the implementation of a strict lockdown for 2 months and strong petrochemical demand in China and India, as well as stronger regional mobility, particularly in South Korea, Indonesia, and India.

The complete development of the average price of main crude oil in May 2022 compared to April 2022 is as follows:

Dated Brent rose by US$9.23 per barrel from US$104.39 per barrel to US$113.62 per barrel.

WTI (Nymex) rose by 7.62 US dollars per barrel from 101.64 US dollars per barrel to 109.26 US dollars per barrel.

Brent (ICE) rose by 6.04 US dollars per barrel from 105.92 US dollars per barrel to 111.96 US dollars per barrel.

The OPEC basket rose by 8.23 US dollars per barrel from 105.64 US dollars per barrel to 113.87 US dollars per barrel.

Brent (ICE) rose by 6.04 US dollars per barrel from 105.92 US dollars per barrel to 111.96 US dollars per barrel.

The OPEC basket rose by 8.23 US dollars per barrel from 105.64 US dollars per barrel to 113.87 US dollars per barrel.