Govt may raise state budget oil price assumption by 8.8 percent

Government plans to raise its oil price assumption, used when drawing up the national budget, by about 8.8 percent to reflect an increase in international crude oil prices, the Bloomberg reported on Friday.

The assumption may be raised to US$62 a barrel, from $57 a barrel, according to a draft of the revised budget from the Ministry of Finance. The government will ask parliament's approval next week to raise the assumption.

The government will also seek approval to cut its crude oil sales forecast to 1 million barrels a day in the revised budget, from 1.05 million barrels a day, the draft said.

Indonesia uses the oil price assumption to determine fuel subsidies paid to the state oil company, and to set revenue and budget deficit targets.

Soaring oil prices and higher domestic demand are draining Indonesia's finances as the government subsidizes fuel for its 238 million people, threatening to derail the budget deficit target.

Government expects oil price to fall to $60 a barrel once concern about Iran's uranium enrichment program is resolved, in line with estimates from the Organization of Petroleum Exporting Countries, Maizar Rachman, OPEC's governor for Indonesia, told reporters in Jakarta Friday.

"After the problem with Iran is resolved, oil price in New York will average at $65 a barrel this year and the Indonesian crude price at $62 a barrel," Rachman said.

Indonesia, the second-smallest member of OPEC, has to import a third of its oil products requirement as local refineries can't meet demand. (*)