Policymakers aim to adjust legal reserves

Refined oil to be increased, crude cut

Energy policymakers are planning to increase the volume of the country’s legal reserves for refined oil from oil traders to 2% or 7.3 days, up from 1% or 3.65 days.

On the other hand, oil refiners are planning to cut crude oil reserves from 6% or 21.9 days to 5% or 18.25 days.

For both crude and refined oil, Thailand’s reserve is 7% or 25.55 days for oil refiners and traders.

Witoon Kulcharoenwirat, directorgeneral of the Energy Business Department, said the moves will maintain the total reserve at 7% but add 1% volume of refined oil and cut 1% volume of crude oil.

He said the aim is to cut operating costs for oil refiners and balance crude oil stock by adding resources from East and Southeast Asia and the US, instead of relying on the Middle East.

“The department will hold discussions with oil traders and refiners within the next month to prepare for the country’s new oil reserve,” Mr Witoon said. “Previously, a group of oil refiners proposed to reduce the crude oil reserve to 3% and increase the refined oil reserve to 3%, but the government later deducted the refined oil reserve to 1% during the Iranian nuclear crisis in 2012.”

Mr Witoon said the lowering of the crude oil reserve cap will result in a decline in retail oil prices of 16 satang per litre.

The final decision of the new oil reserve will be disclosed by the Energy Policy Administration Committee before a timeline is outlined.

Before the global oil price collapse in 2014, Thailand’s oil reserves were 6% for crude oil and 6% for refined oil.

After the collapse, policymakers cut refined oil to 1%, a cap that has been maintained since.

Sukrit Surabotsopon, president of oil refiner IRPC Plc, said he agrees with the policymakers’ move because the timing is appropriate and there are no signs of disruption in oil transport.

He said the company’s oil stock facility is designed to store just 5% of oil volume, so IRPC needs to rent oil tanks for additional stock.

“If the crude oil reserve is cut to 5%, IRPC can save its working capital to reserve and reduce stock losses when global oil prices fluctuate,” Mr Sukrit said.

The global oil price is forecast in a range of US$55-60 a barrel, similar to the average of $57 last year, he said.