Highlights

AmResearch

Author: kiasutrader   |   Latest post: Wed, 8 Feb 2017, 11:21 AM

 

Economic Update - Government to dismantle fuel subsidies and provide a more targeted based subsidy

Author:   |    Publish date:


- The International Energy Agency said on Tuesday that global demand for oil would be much weaker than previously expected, suggesting that oil prices may decline further.

- As at YTD September, the average crude oil prices for WTI and Brent were USD99.62 and USD106.99 per barrel respectively. As a recap, BNM’s full-year price assumption for crude oil is USD105 per barrel for 2014.

- Note that the WTI and Brent crude oil prices registered monthly averages of USD93.03 and USD98.57 per barrel respectively in September.

- Meanwhile, the petrol pump prices for RON95 were adjusted higher by 20 sen to RM2.30 per litre on 2 October, which lowers the government subsidy to RM0.28 per litre.

- If global crude oil price falls further, the government fuel subsidy will reduce even without the adjustment in the petrol pump prices.

- Based on our estimate, government subsidy on RON95 petrol will reduce by RM0.26 per litre should the global crude oil price fall by 10%.

- As such, we estimate that the breakeven of the global crude oil price is at an average of USD84.80 per barrel if RON95 remains at RM2.30 per litre without government subsidy.

- The provision for overall subsidies amounts to RM37.7bil (or -7.1% YoY) for 2015 as the government expects the Brent crude oil to trade at an average of USD100 per barrel.

- Assuming that the government allocates RM21bil for fuel subsidies in 2015, thus, a reduction in the global crude oil by 10% could potentially reduce overall subsides to about RM35.6bil (or -RM2.1bil per annum).

- The government aims to eventually float the RON95 petrol price to market rate while providing a more targeted based petrol subsidy to the low income group.

- Hence, petrol pump prices will likely float according to market rate once the government implements the targeted based subsidy programme.

- Based on yesterday’s close, the WTI and Brent crude oil prices stood at USD80.66 and USD83.78 per barrel respectively.

- All in all, we expect headline inflation to register a full-year average of 3.2% in 2014 and 4.2% in 2015 on the back of higher domestic cost and reduction in subsidies.

- Ahead of the inflation statistical release by the Department of Statistics on 17 October, we anticipate an inflation growth of 2.5% for September vs. 3.3% in August.

Source: AmeSecurities

Share this

  Be the first to like this.
 


APPS
I3 Messenger
Individual or Group chat with anyone on I3investor
MQ Trader
View candlestick stock charts with Technical indicators
MQ Affiliate
Be rewarded by being an MQ Affiliate
 
 

605  230  568 

ActiveGainersLosers
Top 10 Active Counters
 NameLastChange 
 FOCUS 0.06-0.005 
 GOCEAN 0.0450.00 
 MTOUCHE 0.285+0.005 
 TANCO-WB 0.07+0.02 
 PERMAJU 0.1450.00 
 TANCO 0.145+0.01 
 MINDA 0.145+0.02 
 UCREST 0.30+0.005 
 TAWIN-OR 0.065-0.005 
 CAREPLS 2.41+0.05 

FEATURED POSTS

1. MQ Trader - Introduction to MQ Trader Affiliate Program MQ Trader Announcement!

TOP ARTICLES

1. HOW PUMP AND DUMP SYNDICATES OPERATE IN BURSA, Please Avoid At All Costs, Calvin Tan Research THE INVESTMENT APPROACH OF CALVIN TAN
2. 木材价格暴涨,这家公司竟然没有人买?! Swim With Sharks
3. Are you an INTELLIGENT INVESTOR? You can beat Buffett with THIS STOCK with 100% return in 2 months! Ultimate Stock Tips
4. ARB Berhad – Not As Good As It Seems. Be Cautious. The 1994 Investor
5. U.S. Suffers Sharpest Rise in Poverty Rate in More Than 50 Years - Koon Yew Yin Koon Yew Yin's Blog
6. Calvin replies to CynicalCyan, THE INVESTMENT APPROACH OF CALVIN TAN
7. Number of Covid 19 cases solely depends on Government's efficiency - Koon Yew Yin Koon Yew Yin's Blog
8. World’s most vaccinated nation is spooked by Covid spike (Chinese-made Sinopharm vaccine widely used in Seychelles) News1
PARTNERS & BROKERS