Petronas' denial of trading in crude oil futures market not convincing.
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Media Statement
by Ronniu Liew Thian Khiew
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(Petaling Jaya, Friday): Crude futures tumbled on Tuesday a day after surging to new record high points close to $61 per barrel in New York on concerns that refineries will struggle to meet strong demand for energy during the fourth quarter, particularly from the United States and China.

The futures contract had hit $60.95 on Monday  the highest level since it was first traded in 1983 as supply and demand concerns were exacerbated by a weekend election win for the ultra-conservatives in OPEC heavyweight Iran.

In London on Wednesday, the price of Brent North Sea crude oil for delivery in August rose four cents to $57.22 per barrel after diving $2.12 to 57.18 the previous day.

Amid concerns of possible supply shortages during the fourth quarter, the market was expected to study closely the US inventories report on energy stockpiles to be released later Wednesday.

Analysts' consensus forecast was for a slight drop in US crude oil stockpiles, a rise in distillates and no change for gasoline, or petrol, stocks.

Prices have rocketed to record high points on concerns that refineries will be unable to provide enough distillates, which include heating fuel, to meet demand during the northern hemisphere winter.

Record high prices could meanwhile force China to delay the filling of its strategic reserve indefinitely. Similar to the US strategic reserve, Beijing aims to stockpile up to 100 million barrels of petroleum, equivalent to almost a month's national consumption.

On the other hand, Malaysian consumers must not be too surprised by another price hike for petrol and diesel in July, barely two months after the last adjustment on May 5. This is simply because the Malaysian Government has to pay a high price for serious blunder committed in futures market in the past.

On Tuesday, both the PM and DPM have once again warned that the BN Government has no choice but to cut the petrol and diesel subsidies. They seem to have no clues at all on how to prevent another round of inflation and its consequences to the Malaysian economy.

DAP's Secretary General Lim Guan Eng has warned about the rising inflation in recent months and the inevitability of upward interest rate adjustment once the inflation rate hits 4% or more.

Petronas has hit a record high pre-tax profit of RM58.3 billion for the year ended March 31, 2005 according to its President and CEO Tan Sri Mohd Hassan Marican. Its net profit for the year rose to RM35.5 billion.

After months of keeping mum, Hassan Marican has finally denied that Petronas was involved in crude oil futures market for the first time when he was pressured by journalists in yesterday's press conference.

He claims that Petronas has not traded "a single drop of oil". If that's so, Petronas should be making much more profit then what was being declared yesterday. He can only convince Malaysians if he can display a more detailed account for public scrutiny.

World oil price has steadied over the last few days. If the BN Government still proceeds with the price hike, it would have nothing to do with the present world oil price.

Many Malaysians still do not understand why they need to pay a higher price for petrol and diesel at a time when Malaysia is still a net exporter of petroleum (a surplus of more than 200,000 barrels a day).

I still believe that the BN Government has not been telling the truth - that they have actually made a big blunder in the crude oil futures market during the 1997 financial and economic crisis. If it's not for the big blunder, Petronas should be laughing all the way top the banks and profit generated from the all time high world oil prices will be more than sufficient to pay for the petrol and diesel subsidies.

The price of petrol may eventually rise to more than RM2.00 per liter by end of 2006 if the BN Government proceeds with cutting all subsidies on petrol. Even the price of diesel may reach RM1.70 per liter.

DAP has taken a stand that the Government should continue to provide subsidies (estimated at about RM9 billion for 2005) using Petronas' profit. It should not be a problem now that Petronas has recorded an all time high profit of RM35.5 billion for year 2005.

(01/7/2005)

* Ronnie Liu Tian Khiew, DAP International Secretary and NGO bureau chief