OIL PRODUCTION CUT (Impact)

Mr Hawazi Daipi asked the Minister for Trade and Industry what will be the impact of the oil production cut by the Organisation of Petroleum Exporting Countries - indicating higher oil prices - on the economy and on household utility bills.

BG George Yong-Boon Yeo: Mr Speaker, Sir, the Organisation of Petroleum Exporting Countries (OPEC) cut crude oil production by 1.5 million barrels per day (bpd) on 1st February this year in order to maintain oil prices at around US$22 to US$28 per barrel.

Brent crude oil price has risen slightly to US$30 per barrel, due partly to colder weather in the Northern Hemisphere, but this is well below the peak of US$37 in September last year. The cut in production is likely to lead only to a short-term increase in prices amid an increasingly sluggish global economy. Producer competition is also likely to depress oil prices. Oil price futures, which is a forward indicator of oil prices, suggests that oil prices would ease in the months ahead. The 3-month and 12-month oil price futures as at 14th February this year are US$27 and US$25 per barrel respectively. The OPEC oil production cut is therefore not expected to have a big impact on the Singapore economy.

The impact on household electricity bills will depend on global fuel oil prices. If fuel oil prices remain stable, as suggested by the oil price futures market, there should be no reason for higher household utilities bills this year.