Warning Of High Oil Price

The oil price in the international market continues to stay in high for several months. It is worried about the negative effect of the high oil price on the recovery of domestic economy.

According to Korea National Oil Corporation, the price of West Texas Intermediate (WTI) for the delivery in April was transacted at 24.31 dollar, which is 0.47 dollar higher than 23.84 dollar on the previous weekend, in the New York Commodity Exchange on 11th. Compared to 21.01 dollar on January 2nd, the oil price increased 3.3 dollars in the past 2 months.

The spot price of Brent Crude was 24.00 dollar and futures for April was 23.89, which is 3 dollar higher than early this year.

Particularly, the spot price of Dubai crude, the major oil import of Korea, jumped high up to 23.11 dollar from 19.30 dollar in January 2nd.

The international oil price, slipped down by the decrease of airplane passengers after 9.11 terror, continues rising trend for 4 months since hitting the bottom in mid November. The oil price of Dubai crude in mid November last year was 15.77 dollars, Brent crude 16.65 dollars, WTI 17.21 dollars. From that point, the oil price has risen over 7 dollars per barrel.

Korea National Oil Corporation and the Ministry of Commerce, Industry and Energy anticipated that the oil price is likely to increase for a while since the U.S. air raids against Iraq seem pending and the oil demand will increase by the recovery of the world economy.

In addition, if the members of OPEC reaffirm their promise for `reduction of 1.5 million barrels a day,¡° implemented from January this year, at the general meeting in Vienna, Austria, and Russia keeps its promise to reduce the oil production by 150,000 barrels a day, the rise of oil price may be accelerated. It is also reported that the speculative investors are storing up oil, expecting further increase of the price.

KNOC anticipated that, if the attack against Iraq is actualized, the oil price may be skyrocking by the 2 million barrel reduction of oil supply per day in the international market but if could fluctuate in the range of 1-2 dollars since the elements for rise have been reflected in the market already.

Ja-Ryong Koo bonhong@donga.com