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Baht/$ 33.51/56
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GOLD |
14,350
+ 350
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West Texas Intermediate (WTI) prices spiked to a new intraday high of $142.99 a barrel on Friday amid continuing supply concerns, a weak dollar, and Opec's expectations of crude prices reaching $170 a barrel in the coming months. The benchmark contract later eased back in New York to end the week at $140.21.
Last week, geopolitical tensions in oil-producing countries continued to drive prices sharply higher. A rumour that Israel had carried out a military exercise to bomb a nuclear site in Iran raised fears of supply disruption. Unrest in Nigeria from rebel attacks and worker strikes have cut production and put output at risk. Libya has threatened to cut its production in response to US threats against oil producers, stoking further supply uncertainty.
Funds continued to pour money into the energy commodity market to hedge against dollar weakness. The US dollar slumped to a two-week low against the euro after the Federal Reserve kept interest rates unchanged on concerns over the weak US economy. Meanwhile, the European Central Bank is likely to raise its interest rates to curb high inflation.
Meanwhile, the outcome of the Jeddah oil summit in Saudi Arabia on June 22 turned out to be disappointing. Saudi Arabia confirmed that it would pump an additional 200,000 barrels per day in July, taking production up to 9.7 million bpd. The increase was lower than initial reports of 500,000 bpd.
Looking forward, geopolitical risks, dollar depreciation and speculative fund activity will continue to be the main factors bolstering crude prices. We are keeping a close eye on Commodity Futures Trading Commission (CFTC) regulations to limit excessive speculation in energy futures markets after the agency received the green light from US lawmakers last Thursday.
Gasoline prices in Singapore averaged $141 a barrel last week, driven by volatile crude prices and mixed product fundamentals. The market was pressured by an influx of supply from Japan, South Korea, Taiwan, Thailand and India. As well, Indonesia plans to lower gasoline imports for July after lifting refining output to meet high domestic consumption. But news of refinery maintenance in Singapore and Malaysia lifted the market late last week because many cargoes were fixed to move into Malaysia to cover the shortfall.
The recent rise in retail prices in China, meanwhile, is unlikely to have a significant impact on Chinese demand since prices remain below market levels. However, it could encourage small refineries to increase production, leading to reduced gasoline imports in the near future.
Driven by abundant supply in Asia and cooling demand in the US and Europe, diesel markets have eased in Asia, similar to other regions. Global diesel supply had been increasing after several refineries resumed operations. However, strong crude prices and robust demand in Asia and Australia helped limit a sharp decline in diesel prices in Singapore.
Indonesia, a major Asian importer, increased its July diesel imports by around 20% from its original plan to build stocks during the peak school holiday season.
As well, diesel cargoes continued to move to Australia to cover the supply shortfall after an explosion that cut gas supply early this month. We anticipate that sustained Chinese demand ahead of the Olympics in August will also lend support to diesel prices in Singapore in the upcoming week.
Prepared by Thai Oil Plc
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