2.2 Oil price trend in 2009
- The average Dubai crude oil price in 2009 is expected to be around 50-60 USD per barrel, lower than an average of 93.65 USD per barrel in 2008. The average price in firstfour months of 2009 was at 45.49 USD per barrel. Average price increased from 44.27 USD per barrel in the first quarter to 49.71 USD per barrel in April and continued its upward trend to an average of 56.68 USD per barrel during 1st -21st of May 2009 with its peak at 59.32 USD per barrel on 21st of May.
In the second half of 2009, crude oil price is likely to be higher than the first half. This upward trend is attributable to the better signs from major economies which are likely to bottom out in the second quarter, in particular, China, the US and major economies in Asia. The continued improvement in these economies will raise global oil demand.
According to the report on crude oil inventory, US crude oil inventories on 15 May 2009 were at 368.5 million barrels, declined by 2.1 million barrels which was larger than the forecast of 0.2 million barrels. The sharp reduction was due to the reduction of crude oil import. Meanwhile, US gasoline inventories decreased by 4.3 million barrel to 204 million barrel, larger than an expectation of 1.2 million barrel because. The large fall of gasoline inventories was attributable to the increase in demand in preparation for the upcoming of Memorial Day weekend (between 23-25 May). Furthermore, confidence of world economic recovery is likely to persuade OPEC countries to kept oil production unchanged in their meeting on 28th of May as global recovery will drive crude oil price to a suitable level in the range of 70 — 80 US dollar per barrel.
-Most analysts estimated that average WTI crude oil price in 2009 will be in its low range with the higher average price in the second half than in the first. However, with fragile global recovery, the strong upward pressure is unlikely. On average, the forecasted crude oil price in 2009 is in the range of 40-60 USD per barrel.
-The average crude oil price in 2009 will be notably lower than in 2008, although the global economic recovery in the latter half of 2009 put upward pressures on oil price to be higher than in the first. The supporting factors oil price to be lower than last year are as follows:
Economic recession in 2009 will significantly lower oil consumption demand. According to the EIA’s report on Oil Market Situation in May 2009, global oil demand in 2009 is forecasted at 83.67 millions barrel per day, decline by 1.77 millions barrel per day from 85.44 millions barrel per day in 2008. OECD oil consumption demand in 2009 is estimated at 45.35 millions barrel per day compare to 47.33 millions barrel per day in 2008. The reduction of OECD demand is due to sluggish demand in Japan which is forecasted to decline by 0.5 millions barrel per day. Nevertheless, the consumption demand in non-OECD countries is forecasted to increase by 0.2 millions barrel per day, from 38.1 to 38.32 millions barrel per, which is attributable to the growing demand in China, India and Middle East.
An enforcement of Stop Excessive Energy Speculation Act of 2008 in USA is expected to reduce oil price speculation. In addition, the operation of U.S. Commodity Futures Trading Commission (CFTC) is expected to close loopholes in anti-speculative rules of futures trading market.
US Dollar is expected to appreciate. The US dollar has tends appreciate further in 2009 because as foreign investors shift their investment from other regions, likes EU and Asian countries, back to the US, especially amid the signs of economic recovery. In addition, the recovery of financial sector from the crisis is likely to stimulate demand for US dollar with will eventually dampen long position in crude oil and other commodities.
2.3 Thai Economic Outlook in 2009
2.3.1 Key Assumptions for 2009 Projection
- The world economy is expected to contract by (-2 .0 ) — (-1 .5 ) percent, much worsen from the
expansion of 2.8 percent in 2008. The assumption of world economic growth is revised downward from the earlier assumed growth in the range of (-0.5) — (0.5) percent which was used in the previous projection.
The downward revision is due to the shaper-than-expected contraction of major economies in the first quarter, including the US, Euro zone, Japan and NIEs. Meanwhile the growth outlooks for China India, Asean-5 and other major trading partners of Thailand are downgraded, reflecting the severe negative spillovers of global crisis on international trade, manufacturing production, employment, capital flows and liquidity in global financial market.
- Average Dubai crude oil price in 2009 is expected to be in the range of 50-60 USD per barrel, revised upward from an average 45 — 55 USD per barrel assumed in the previous projection and higher than
an average 44.47 USD per barrel in the first 4 months of 2 0 0 9 . This upward revision reflected the rising
trend of oil price due to improving global economic prospect in the remaining of the year and the rise of
speculative demand amid the signs of global recovery and improved international financial market.
- Export price in terms of US dollars is likely to decline by 4 percent while import price will
decrease at a faster pace of 8 .0 percent. This asymmetric decline will improve term of trade, and
coherence with a sharper decline in import price of oil than export price of agricultural and manufacturing
products.
2.3.2 Economic outlook for 2009: The Thai economy is forecasted to contract in the range of (-3.5) — (-2.5) percent with (-0.5) — (5.0) percent of headline inflation and a current account surplus of 3.7 percent of GDP.
(1) In the previous release on the 2 3 rd of February 2009, the Office of National Economic and Social development Board (NESDB) projected that the Thai economic growth would be in the range of (-1.0) — (0.0) percent with (-0.5) — (5) percent of headline inflation and a current account surplus of 0.9 percent of GDP.
(2) In this release on the 25th of May 2009, NESDB revised the growth projection downward to a contraction in the range of (-3.5) — (-2.5) percent according to the following reasons:
(2.1) Export volume is likely to decline by more than what has been previously forecasted in the press release on the 23rd of February 2009at 6.5 percent, in line with the downward revision of global economic contraction that is likely to be worsen than that assumed in the previous projection.
(2.2) Private consumption and investment are revised downward due to the stronger-than-expected spillovers from export contraction and the negative effects from domestic political condition that aggravated economic sentiments further on top of the hit on incomes. As a result, private consumption and investment has already contracted quite significantly as witnessed in the first quarter. In this projection, private investment and consumption are forecasted to recover in the latter half of 2009 as in previous projection. However, downward revision in this projection takes into consideration their decline in the first half of the year.
(2.3) Number of foreign tourists is expected to increase at a slower pace than the target. For the whole year of 2009, the total number of foreign tourist is estimated at 1 3 .6 million, a downward revision from an estimate of 14 million in the previous projection. This revision reflected the facts that (i) the number of tourists in the first quarter was only 3 .6 7 million which is a 1 5 .2 percent decrease from the same period last year (ii) in the second quarter, the tourism sector was directly affected by political unrests during Songkran holidays with possible slight effects in the second half of the year (iii) Job losses in major tourism markets continued to rise and (iv) the epidemic of 2009 flue is likely to defer traveling decision.
2.3.3 Projected Growth Components in 2009
(1) Total consumption expenditure is projected to grow by 2 .0 percent, slightly decelerate from 2 .2 percent in 2 0 0 8 . However, private consumption is revised downward to 0.4 percent, from 2.2 percent in previous projection. This downward revision is due to spillovers of export slump on household incomes and spending which are likely to persist in the remaining of 2 0 0 9 . However, the impacts tend to ease in the latter half due to a better performance of export and production under the conditions of global economic improvement and replenishing of inventory level. Therefore, with the support of stimulus measures, private consumption is forecasted to recover in the second half of 2 0 0 9 .
Government consumption is projected to expand by 11.3 percent, an upward revision from 8.3 percent in previous forecast. The upward revision of government consumption reflected an acceleration of government budget disbursement in the remaining of the year, in particular the budget disbursement of SPI which is likely to be rigorous in the second and third quarters, as well as the expedition FY 2010 budget disbursement and the preparation of development projects under SPII to be ready for budget disbursement in the fourth quarter.
(2) Total investment is forecasted to decline by 6 .2 percent compare to 1.1 percent expansion in 2008, which is a downward revision from 0 .4 percent contraction in previous forecast. Private investment is revised downward from 3.0 percent contraction in previous projection to 9.7 percent contraction. This downward revision reflected the sharp decline of private investment in the first quarter and its tendency to decline in the remaining of the year due to excess production capacity, sluggish and fragile recovery of global demand, weak investor and business confidences as well as lower foreign direct investment and tight international credit market condition. Public investment is, however, projected to expand by 5 .0 percent, a downward revision from 8 .0 percent in previous projection, reflecting its strong contraction in the first quarter.
(3) Value of export in US dollar terms is projected to decline by 1 5 percent, a downward revision from 13.1 percent contraction in previous forecast. Growth of export volume is downgraded from 6.5 percent contraction to 11.1 percent contraction to take into consideration its sharper-than—expected decline in the first quarter and the revised global growth assumption of (-2 .0 ) — (-1 .5 ) percent, compared to that of (-0.5) — (0.5) percent assumed in previous projection. Export price is revised from a decline of 6 .5 percent to a reduction of 4 .0 percent due to the signs of commodity price recovery in international market.
(4) Import value in US dollar terms is forecasted to decline concurrently with the contraction of export and investment, the slowdown of consumption spending and the downward revision of import price assumption. Import volume is projected to decrease by 1 9 .6 percent, compared to 1 4 .0 percent in previous projection, reflecting the sharper decline in production, export and investment than in previous forecast. In addition, the assumption of import price is revised downward from 7.0 percent reduction to 8.0 percent.
(5) Trade balance is forecasted to record a surplus of 8 .3 billion USD. Combined with surplus in service account, current account balance is projected to register a large surplus of around 9.3 billion USD which is equivalent to 3.7 percent of GDP, an upward revision from previous projection of 0.9 percent of GDP. The surge in current account surplus is mainly due to the downward revision in both import quantity and price to the greater extent than those of exports.
(6) Inflation is projected to be in the range of (-0.5) — (0.5) percent, unchanged from previous projection. Although oil price tends to increase in the latter half of 2009, the weak labor market condition and domestic demand will help suppress price pressure in the remaining of 2009.
(7) Unemployment rate is forecasted to be in the range of 2.0 — 2.5 percent which is equivalent to approximately 7.8 hundred thousand unemployed persons, a downward revision from 2.5-3.5 percent in previous projection. This revision is attributable to the sign of labor market bottoming out reflected in the highest claims for unemployment benefit in January-February. Moreover, new recruitment has been seen in various industries; for example, electronic industry that started to recruit more workers in April and early May.