Refined oil ‘could hit $100’

By: POST REPORTERS, Bangkok Post – Thailand
Published: Jul 15, 2006

“…Tiraphot Vacharaphai, the chairman of Shell Co of Thailand, said PTT should increase its prices to match those of its rivals and eliminate any market distortions.”

Tensions in the Middle East could push the prices for refined petroleum products in Singapore as high as $100 per barrel by the end of the year, according to Anusorn Sangnimnuan, the president of Bangchak Petroleum Plc.

Local pump prices will reach a new high today after oil companies, with the exception of PTT Plc, announced a 40- satang increase in their pump prices in line with higher world crude prices.

The increases will push the price of 95 octane petrol to 30.59 baht per litre and diesel to 28.34 baht, both new highs.

Global oil prices yesterday rose to record highs above $78 per barrel on supply concerns following new violence in the Middle East. Israel continued its offensive on Lebanon yesterday, with fighter planes bombing the airport, fuel tanks and highway to Syria for the second day.

The radical group Hezbollah fired more than 100 rockets into Israel in retaliation, with more than 50 people dead in the two days of violence.

The tensions helped push Asian markets downward as investors worried that rising energy prices could hurt world economic growth, with Thai stocks falling 1.6% for the second straight day of losses.

Crude oil contracts continued to rise to all-time highs, with the August contract for light sweet crude in New York at $77.50 and the Brent contract for August delivery in London reaching as high as $78.03.

The benzene price in Singapore rose $2.47 to $85.99 per barrel on Thursday while the diesel price rose by $1.59 to $88.25 per barrel.

Mr Anusorn said prices for West Texas and Brent crude would likely hit $80 per barrel, but added fears of a rise to $100 per barrel of crude were likely overblown.

Finished oil products in Singapore, however, would likely rise to $100 per barrel, which would affect domestic prices.

“If the situation remains tense, then local diesel prices could reach 30 baht per litre soon,” he said.

Chaiwat Choorit, a senior executive vice-president of PTT Plc, said marketing margins had fallen due to the price rises.

PTT, the country’s largest oil retailer, has yet to decide whether to increase prices. The state-owned company has typically been slower to raise prices due to government policy.

“Whether PTT will increase its petrol prices or not will depend on the decision of other oil companies,” he said.

But Tiraphot Vacharaphai, the chairman of Shell Co of Thailand, said PTT should increase its prices to match those of its rivals and eliminate any market distortions.

Mr Tiraphot said the average marketing margin for Shell would rise to 90 satang per litre with the new price increase, but still below the normal margin of 1.10 baht.

Metta Buntherngsuk, the director-general of the Energy Policy and Planning Office, said authorities would accelerate efforts to introduce alternative fuels such as natural gas for vehicles (NGV) and gasohol to help cushion the impact of high world oil prices.

However, he said there was no talk of reintroducing subsidies to help reduce pump prices. Last year Thailand scrapped a subsidy programme that had racked up costs of nearly 100 billion baht over 18 months by keeping diesel and petrol prices artificially low.

Analysts said the rise in world oil prices would increase pressure on local stocks and corporate profits.

The Stock Exchange of Thailand index closed yesterday at 661.59 points, down 10.75, in trade worth 11.3 billion baht. Energy stocks lost 0.52% on the day, with banks falling 2.84% and property off 2.35%.

Pongphan Apilyakul, research manager at Kim Eng Securities, said investors feared that the Israel-Lebanon conflict would soon spread to Palestine.

He said the index should see support at the 660-point level, and that the recent declines offered a good opportunity for medium- to long-term investors to pick up oversold blue-chip stocks.

Mr Pongphan said short-term trends would remain unsettled ahead of the Constitutional Court’s ruling on whether five political parties, including Thai Rak Thai and the Democrats, would be dissolved for election law violations.

Rayong Refinery closed up 1.04% yesterday at 19.50 baht, PTT closed unchanged at 230 baht and PTT Exploration and Production fell 0.93% to 106 baht.

Shares of Bangkok Bank dropped 2% to 98 baht, Siam Commercial Bank lost 4.46% to 53.50 baht and Siam Cement dropped 0.98% to 202 baht.
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