Msia to boost revenue in 2019 on higher oil price

KUALA LUMPUR: Malaysia is expected to receive a boost in its revenue next year on higher oil price, with the local and global analysts predicting the Brent crude to rebound to around US$72-US$75 average a barrel for 2019.

Some analysts have projected as high as RM1.5 billion extra to the government’s coffers next year.

This will be on top of additional revenue gains of between RM4 billion and RM6 billion from new tax measures and government asset sales, as well as savings of around RM6 billion from the introduction of a targeted subsidy scheme, an analyst said.

According to a Bloomberg survey of oil analysts from the world’s biggest banks, the Brent benchmark is expected to rebound to average US$72.5 a barrel in 2019, more than 35 per cent higher than its current price of US$53.27 at press time.

MIDF Research chief economist Dr Kamaruddin Mohd Nor also expects a rebound in oil price but higher at US$75 per barrel.

“We are expecting the same (oil price rebound). This will be good for the government’s coffer,” he told NST Business.

He said in theory, every US$1 per barrel deviation from US$70 a barrel imputed for 2019 Budget will either boost or decline the government’s revenue by RM300 million.

Putra Business School Senior Lecturer and Business Development Manager Dr Ahmed Razman Abdul Latiff said this could be a sign of recovery in Malaysia’s economy if the budget is well managed.

“This is an opportunity for Malaysia to manage 2019 Budget better because additional revenue coming from oil in 2019 will allow the government to continue selected subsidised programs for the people especially B40 as well as managing the federal debt better,” he said.

Barclays Plc head of energy and commodities research Michael Cohen in an interview with Bloomberg said the recovery in oil price would be mainly due to reduction in supply and recovery in global economic conditions.

“We could even see something similar to a V-shaped recovery next year, on two very important conditions.

“One, that the reduction in OPEC exports leads to a reduction in inventories. And two, that we don’t see a further deterioration in macroeconomic conditions.”

Bloomberg research house, Bloomberg Intelligence senior government analyst Rob Barnett and BI senior industry analyst Will Hares, said the re-imposition of United States sanctions on energy companies involved with Iran will be a key driver for the global oil market in the first half and beyond 2019.

“Re-imposition of Iran Sanctions oil exports from Iran have declined by about 1.5 million barrels a day since renewed US sanctions were announced in May.

“Geographical diversity means no single concern poses an existential threat to integrated oil and gas companies, but global oil supplies could be reduced by a further 500,000 barrels a day, if not more, on geopolitical factors in Iran and Venezuela, among other countries,” they said.

Source: NST