OIL PRICE SEEN RISING NEXT YEAR, BOOSTING GOVT REVENUE PROJECTION
Forex Time’s projection boosts hopes for higher government revenue
OIL prices may breach US$70 (RM296) per barrel next year, says currency specialist ForexTime (FXTM). This indirectly suggests that the government can generate more revenue than its official projection of almost RM240 billion in the 2018 Budget.
Next year’s budget was based on the oil price of US$50 per barrel, and the government had previously forecast dividends from Petroliam Nasional Bhd (Petronas) to total RM16 billion this year, up from an initially budgeted RM13 billion, before rising to RM19 billion next year.
The government expects the Goods and Services Tax, corporate tax collection and investment income to drive revenue growth of 6.4 per cent year-on-year.
FXTM corporate development and market research vice-president Jameel Ahmad said crude oil prices would, among others, be boosted by the Organisation of the Petroleum Exporting Countries’ (Opec) commitment to production cuts and openness to discuss with the United States shale producers.
“If you are asking what would need to happen for oil prices to rally, Opec’s commitment to the output cuts and willingness to discuss with the US shale oil producers would be it.
“One year ago, nobody expected Opec to collaborate with nonOpec producers, but it happened. And collaboration with US shale producers would further increase oil prices as production cuts must be done if they were to collaborate,” said Jameel.
He added that Opec had also made some big moves to increase oil prices such as holding meetings between world leaders, which included the Saudi King Salman Abdulaziz and Russian President Vladimir Putin.
Brent crude, the international benchmark for oil prices, is up almost 40 per cent since June. Last Friday, it hit US$60 a barrel for the first time in more than two years, in the latest sign the market is recovering after a threeyear glut.
The global oil and gas industry is reportedly hiring more people than letting go for the first time in three years.
Oil and gas players had made major expenditure adjustments, with Petronas reducing its capital expenditure by about RM50 billion in four years.
The better outlook, according to some research houses, was sweet music to Petronas as it went into 2018 with a more sustainable oil price.
Petronas may be able to give better dividends next year if its earnings increase once oil prices stabilise, although not as high as previously.